Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

GULF OIL REFINING BILL [Lords]

[Queen's Consent, on behalf of the Crown, signified]

Bill read the third time and passed, with Amendments.

ABERDARE MARKETS AND TOWN HALL COMPANY BILL [Lords]

As amended, considered; to be read the Third time.

BRIGHTON SKYDECK BILL [Lords] (By Order)

Second Reading deferred till Thursday.

Oral Answers to Questions — COMMONWEALTH RELATIONS

Rhodesia

Mr. William Hamilton: asked the Secretary of State for Commonwealth Relations what further initiatives he proposes to take to solve the Southern Rhodesian problem.

Mr. Hector Hughes: asked the Secretary of State for Commonwealth Relations if he will make a statement on the problem of Southern Rhodesia, indicating what further negotiations have taken place during the last two months and what progress has been made towards a settlement.

Mr. Wall: asked the Secretary of State for Commonwealth Relations if he will make a statement about the progress of discussions on independence with the Rhodesian Government.

Mr. Goodhew: asked the Secretary of State for Commonwealth Relations what consultations he has had with the

Rhodesian Government since the Commonwealth Prime Ministers' Conference; and if he will make a statement.

Mr. Fisher: asked the Secretary of State for Commonwealth Relations what progress has been made in his discussions with the Government of Rhodesia since the Commonwealth Prime Ministers' conference.

The Secretary of State for Commonwealth Relations (Mr. Arthur Bottomley): As my right hon. Friend the Prime Minister said on 29th June, we are going forward with the discussions with Mr. Smith. These, of course, remain confidential, but the general considerations which guide our approach to the negotiations were outlined in the communiqué of the recent Commonwealth Prime Ministers' Meeting.

Mr. Hamilton: Does my right hon. Friend recognise that, whatever the eventual solution of this problem, time is not on our side, and would he refute the suggestion recently made that a few years here or there do not matter?

Mr. Speaker: Order. That matter can be raised on another occasion, but not on this.

Mr. Hamilton: Can my right hon. Friend say, following this expression of opinion, what official protests have been received in his Office about it?

Mr. Bottomley: None, Sir.

Mr. Hughes: Cannot my right hon. Friend devise some way of bringing home to the Government of Southern Rhodesia the importance of the solidarity of the Commonwealth, and would he consider paying another visit to that area with a view to emphasising the importance of trade relations between that country and the rest of the Commonwealth, indicating to it that it may suffer economically unless it settles its political differences?

Mr. Bottomley: I am assuming that the suggestion of my hon. and learned Friend that I should pay a visit to Rhodesia refers to the political situation and not to increased trade. Increasing trade, we hope, will continue. With regard to the suggestion that I might visit Rhodesia, if I thought that any useful purpose would be served by doing so I would not hesitate.

Mr. Wall: Is the right hon. Gentleman aware that we wish him well in these negotiations and hope that by the exercise of patience and understanding we may reach an agreed solution? Does he think that Mr. Smith might be visiting this country in the near future?

Mr. Bottomley: No, Sir. The discussions are continuing and we hope that, as a result of these continuing discussions, in the end success will result.

Mr. Sandys: In view of the difficulty of getting Oral Questions answered at the right time—we know that Parliamentary business makes it difficult—would the right hon. Gentleman give us an assurance that if there is something to report about the progress of these negotiations he will take the opportunity to make a statement?

Mr. Bottomley: Yes. As in the past, I will do my best to keep the House informed on this matter.

Mr. Goodhew: Does the right hon. Gentleman know that there is some concern that the undertaking which he gave to the House on 15th March, when he said that the Government intended to abide by the convention, is somewhat in conflict with the undertaking which he gave to the Commonwealth Prime Ministers that he would be prepared in certain circumstances to call a constitutional conference without the agreement of the Rhodesian Government? Would he confirm that this is not so?

Mr. Bottomley: Mr. Smith has said that he would regard the convening of a constitutional conference by Britain as an interference in Rhodesia's internal affairs. I can only say that the British Government do not accept the validity of that statement.

Mr. Fisher: If, as all in this House are agreed, there is no question of imposing a settlement by force, and while not wishing to appear in any way unsympathetic to the wishes of the other Commonwealth Prime Ministers, may I ask whether the right hon. Gentleman will confirm that there is no way open to Britain of carrying out the wishes expressed in the communiqué that we should suspend the 1961 Constitution and introduce an interim Government?

Mr. Bottomley: As I told the Commonwealth Prime Ministers, the issue is one of settling the matter by peaceful means or by war, and no one goes to war until he has failed to succeed by peaceful means.

Sir C. Osborne: They do not go to war either.

Commonwealth Trade (Discussions)

Mr. Gregor Mackenzie: asked the Secretary of State for Commonwealth Relations what discussions took place with Commonwealth leaders on trade during the recent conference; and what were the results of these discussions.

Mr. Bottomley: I would refer the hon. Member to the Final Communiqué of the Commonwealth Prime Ministers' Meeting, and to what my right hon. Friend the Prime Minister said in the House on 29th June.

Mr. Mackenzie: While thanking my right hon. Friend for that reply, might I ask him whether or not he intends to refer the deliberations of the Commonwealth Prime Ministers to the Commonwealth Export Council, and whether it is hoped that the Ministers of Trade within the Commonwealth will meet soon to discuss matters of Commonwealth trade?

Mr. Bottomley: The Commonwealth Export Council is meeting to see how best we can increase Commonwealth trade. In connection with the Trade Ministers' Conference, it will be necessary, in the first place, for Commonwealth Officials to meet in order to decide the programme for the Ministers when their meeting takes place.

Ceylon (Moratorium on Remittances)

Sir J. Eden: asked the Secretary of State for Commonwealth Relations whether he is aware of the hardship being imposed on many British citizens as a result of the moratorium which the Ceylon Government placed last year on the remittance of interest, profits and dividends and certain pensions from Ceylon; what has been the outcome of the representations he has made on the subject; what further action he is taking to improve the present position; and if he will make a statement.

Mr. Cordle: asked the Secretary of State for Commonwealth Relations whether he will now seek to expedite the remittance of funds of private individuals from Ceylon to this country.

The Minister of State, Commonwealth Relations Office (Mr. Cledwyn Hughes): My right hon. Friend is very much aware of the hardship being imposed on many British citizens as a result of the Ceylon Government's moratorium on remittances. As a result of representations, certain relaxations have been secured. In cases of extreme hardship amongst shareholders in companies incorporated in Ceylon, the remittance of dividends has been allowed: unfunded pensions up to £750 a year are allowed to be remitted and those over that amount are being remitted subject to a quarterly review: sterling is being provided for furlough in most cases. We shall continue to make representations to the Ceylon Government.

Sir J. Eden: I am grateful to the Minister of State for that reply, but is it not a fact that sterling company shareholders are particularly hard hit in this respect? Will he do his best further to impress on the Ceylon Government the fact that very considerable hardship is being experienced by people in this country and that we expect the Ceylon Government, in the light of the assistance they are getting from the International Monetary Fund and from other sources, to honour their obligations?

Mr. Hughes: We are certainly very conscious of the hardship that exists, and I assure the hon. Gentleman that we are pressing the Ceylon Government as hard as we can.

Mr. Cordle: Will the hon. Gentleman further comment on remittance discrimination in this particular sense, for this, again, appears to be a very real hardship? Constituents of mine, on the one hand, have returned to this country with no remittance whatever, having given lifelong service to Ceylon, and, on the other hand, non-nationals have returned, and enjoy the full compensation and reward of retired pay from the Ceylon Government.

Mr. Hughes: I am aware of the hon. Member's constituent's case and have tried to be as helpful as I possibly can.

As the hon. Gentleman knows, the Ceylon Government have throughout continued to allow the remittance of pensions earned by Government service. As I said in my original reply, unfunded pensions up to £750 a year are allowed to be remitted and those over £750 a year are allowed subject to a quarterly review of the position. The Ceylon Government are, as we must recognise, entitled to make their decisions about the priority with which obligations in this regard are met, but we will continue to talk with them about this.

Mr. Tilney: Will the Minister of State also bear in mind that the balance of trade between this country and Ceylon is very much in favour of Ceylon?

Mr. Hughes: That, of course, is constantly borne in mind.

Lagos (High Commission Staff)

Mrs. Renée Short: asked the Secretary of State for Commonwealth Relations what is the salary of and what expenses are allowed to the third secretary on the staff of the British High Commissioner in Lagos.

Mr. William Hamilton: asked the Secretary of State for Commonwealth Relations how many of the staff at the British High Commission at Lagos are temporary; what is their status; and why they cannot be replaced by permanent civil servants.

Mr. Bottomley: A third secretary on the staff of the British High Commission at Lagos would receive a starting salary of approximately £965, rising by annual increments which vary from £50 to £60. The salary is taxable. He would also receive an overseas allowance of £876 per annum and an accountable entertainment allowance of £321 per annum, both non-taxable.
Fourteen members of the British High Commission at Lagos are temporary staff. They are in the executive, clerical or messengerial grades. It is necessary to make temporary appointments of this nature because there is a general and continuing shortage of manpower in the Diplomatic Service.

Mrs. Short: Does not my right hon. Friend think that this unusual appointment of a person who has twice failed the


Civil Service examination to a post that he would have got had he been successful is grossly unfair, not only to those other candidates who failed the examinations and did not get a similar appointment, but to those who were successful?
Does he not also think that it is high time this country was represented abroad by skilled, trained professionals? Will he, therefore, undertake a review of these appointments in his Department with a view to the replacement of those holding them at the earliest possible moment by trained people whose social and educational background gives them more sympathy, understanding and knowledge of those conditions in the countries involved?

Mr. Bottomley: It is necessary to make temporary appointments because of the specific and fluctuating shortages of people with the right qualifications for certain posts which fall vacant from time to time. When the case of the applicant to whom my hon. Friend refers was put to me, I asked, "How would any other applicant fare who was making an attempt to get into the Service for this kind of appointment?" I was told that this would be the treatment, and I saw no reason to make any distinction between that applicant and any other.

Mr. Hamilton: Can my right hon. Friend say how many of those holding temporary appointments in Lagos, or any other overseas High Commission, have failed their Civil Service examination? Secondly, can he tell me whether he still adheres to the view that social background and education—the schools to which applicants went—are not taken into account? Thirdly, is it not the case that the previous Government refused to sanction this appointment?

Mr. Bottomley: With regard to social and educational background, my hon. Friend is already aware, because of information given elsewhere, that applicants have come from all schools and all sections of society. With regard to the particular appointment to which he refers, I again say that one does not make any distinction between any kind of applicant who is suitable for a particular appointment.

Mr. Biggs-Davison: Are not these mean expressions of crypto-republicanism

by question and Motion from the party opposite quite unworthy and becoming a monumental bore?

Mr. Speaker: Order. That must be inviting an expression of opinion which the Minister is not responsible to give.

Mr. Hamilton: In view of the highly unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise this matter on the Adjournment.

Vietnam

Mr. Blaker: asked the Secretary of State for Commonwealth Relations what further steps Her Majesty's Government propose to recommend to their Commonwealth partners in order to facilitate a peaceful solution of the crisis in Vietnam.

Mr. Channon: asked the Secretary of State for Commonwealth Relations if he will make a further statement on the progress of the proposed Commonwealth mission to Vietnam.

Mr. Gower: asked the Secretary of State for Commonwealth Relations what further initiative about the situation in Vietnam has been discussed with other Commonwealth Governments; and if he will make a statement.

Mr. Bottomley: I have nothing to add to the answer given by the Prime Minister on 1st July. Her Majesty's Government do not intend at the moment to take any further initiative with Commonwealth partners on Vietnam.

Mr. Blaker: Is the Secretary of State aware that there will be general support for any further initiatives that the Commonwealth may be able to take in the cause of peace, whether in Vietnam or otherwise, but would he not also agree that unless such initiatives are adequately prepared and very carefully launched they may actually damage the Commonwealth?

Mr. Bottomley: Yes, Sir. It is always desirable, of course, to try to launch any attempt to secure peace in the most careful manner. We were aware at the time of the Commonwealth Prime Minister's Conference that here was an admirable opportunity to seize the initiative, and that is what was done.

Mr. Channon: Can the right hon. Gentleman tell the House what is the latest news he has received from the capitals concerned as to whether or not they are not likely or willing to receive this proposed mission?

Mr. Bottomley: In the case of Peking and Moscow, we have replies which indicate that the mission at this time would not be acceptable. The Hanoi authorities have neither formally refused nor agreed to accept the mission.

Mr. Gower: With regard to the point made by my hon. Friend the Member for Blackpool, South (Mr. Blaker), would the right hon. Gentleman acknowledge, not only that careful and patient preparation is necessary in regard to our Commonwealth partners, but that it is also advisable that every attempt should be made to ascertain what reception such an initiative will receive before action is taken?

Mr. Bottomley: If we did that, perhaps nothing would ever be attempted.

Mr. Rose: In view of the prejudicial effect which the presence of Australian troops may have on the Commonwealth peace initiative, would my right hon. Friend take action to meet the Prime Minister of Australia with a view to the withdrawal of these troops?

Mr. Bottomley: This is a matter for the Australian Government.

Mr. Sydney Silverman: Would my right hon. Friend consider this? If we wish to pursue a useful and profitable attempt at peace negotiations with North Vietnam, it might be a useful preliminary to recognise the Government with whom we propose to negotiate. Would not this ease the path, and might not we advise some of our Commonwealth associates to make that recognition?

Mr. Bottomley: This is a question which might properly be addressed to the Foreign Secretary.

Mr. Emrys Hughes: asked the Secretary of State for Commonwealth Relations which Commonwealth countries have now officially informed Her Majesty's Government of their support for United Kingdom policy in regard to Vietnam.

Mr. Bottomley: At the recent meeting of the Heads of all Commonwealth Governments, or their representatives, unanimous support was given to the proposal made by my right hon. Friend the Prime Minister for a Commonwealth initiative on Vietnam as set out in the communiqué issued after the meeting. The Governments of Kenya and Tanzania, however, have indicated their reservation on certain points.

Mr. Hughes: How many of the Commonwealth countries have indicated their opposition to American action?

Mr. Bottomley: That is a question which ought to be put to my right hon. Friend the Foreign Secretary and not to me.

New Zealand (Double Taxation Agreement)

Mr. Onslow: asked the Secretary of State for Commonwealth Relations what reports he has received from Her Majesty's High Commissioner in Wellington about the effect on British pensioners resident in New Zealand of the failure to negotiate a new double taxation agreement with the New Zealand Government.

Mr. Cledwyn Hughes: The British High Commissioner in Wellington has reported that, in the period immediately following the termination of the 1947 agreement, he received a number of inquiries from British pensioners in New Zealand who were concerned about their tax liability.

Mr. Onslow: Is the hon. Gentleman aware that that is not a very satisfactory reply? There is evidence that inconvenience and distress are still being caused to British pensioners in New Zealand, particularly widows. Will not he take some action to urge his right hon. Friend the Chancellor of the Exchequer to conclude a new double taxation agreement so that the uncertainty can be cleared up?

Mr. Hughes: As the hon. Gentleman knows, my hon. Friend the Financial Secretary said, in reply to a Question asked by the hon. Gentleman yesterday, that our two countries are in touch with each other on this matter.

Mr. Webster: Does the hon. Gentleman think that the agreement on double taxation relief is likely to be accelerated by the Finance Bill?

Mr. Hughes: Perhaps the hon. Gentleman would address that question to my right hon. Friend the Chancellor of the Exchequer.

Lord Mountbatten (Mission)

Mr. Webster: asked the Secretary of State for Commonwealth Relations what countries Lord Mountbatten visited during his recent mission concerning immigration.

Mr. Bottomley: Lord Mountbatten visited Canada, India, Nigeria, Jamaica, Trinidad, Cyprus and Malta.

Mr. Webster: Is the right hon. Gentleman aware that we want to have as much agreement as possible in the Commonwealth on this very difficult and tricky subject? Next time such a difficult negotiation has to be conducted, would it not be a good thing to have somebody who is persona grata in one of the principal immigrant countries, which is Pakistan? Would it not be better if we had had somebody who could have been allowed to go to that country and discuss the matter on the spot?

Mr. Bottomley: The mission went to all the listed Commonwealth countries, including the one mentioned by the hon. Gentleman, except, as the hon. Gentleman rightly said, that Lord Mountbatten was not able to go to that country. The Permanent Under-Secretary at the Home Office, a very eminent and distinguished gentleman, went with the mission to Pakistan and brought back a very satisfactory report.

Mr. Fisher: When is a statement of the Government's policy on immigration likely to be made?

Mr. Bottomley: We hope in due course to tell the Commonwealth Prime Ministers what we have in mind. After that, we shall be in a position to state what the policy of the Government will be, and that statement will be made in the House.

Sir D. Renton: Is the Secretary of State really saying that the opportunity of the Commonwealth Prime Ministers' presence in London was not used to tell them what the Government had in mind?

Mr. Bottomley: Discussions took place with the particular Prime Ministers concerned. As a result of the talks that we had, we are considering the policy which Her Majesty's Government will announce in due course.

Tanzania (British-owned Farms)

Mr. Wall: asked the Secretary of State for Commonwealth Relations how many British-owned farms in the Arusha area of Tanzania have had their leases terminated; whether compensation has now been agreed; and when it will be paid.

Mr. Cledwyn Hughes: According to my information, the leases of four farms owned by three British citizens have been terminated. As I informed the House on 4th May, the Tanzanian Government have stated their intention of paying compensation for unexhausted improvements. I understand that the valuations have already been completed and that a decision on the amount of compensation is likely to be taken shortly.

Mr. Wall: I welcome the steps taken by the Tanzanian Government since the cancellation of these leases, but would the Minister of State bear in mind that it is now nearly nine months since these leases were revoked? Many of the owners are in difficult circumstances in this country? Will he press the Tanzanian Government to come to a final decision over compensation as rapidly as possible?

Mr. Hughes: I realise that there has been a delay, but the hon. Gentleman will realise also that these land questions in Tanzania and elsewhere in East Africa are complicated. We are continuing to press the Tanzanian Government to give us an early decision, because we are aware of the difficulties created for these people.

Sir J. Fletcher-Cooke: First, is it a fact that some of the leases which were originally revoked have been restored to their owners? Secondly, do the Minister and his right hon. Friend the Secretary of State think that there is a long-term future for European farmers in this area? If not, would they consider, in consultation with the Government of Tanzania, introducing some scheme similar to that which has been


adopted in Kenya for the orderly buying out, with their concurrence, of these farmers?

Mr. Hughes: Some of the leases in question have been restored, although obviously the hon. Gentleman would not wish me to give the details here. If he will write to me, I will let him have the details.
On the second question, the Tanzanian Government have publicly stated that farmers, irrespective of nationality, who develop their land and comply with the normal regulations are welcome to stay in Tanzania. As a result of our representations, which were made at the highest level, the position now is that land utilisation committees are being set up by the Tanzanian Government in the various regions of the country to advise the Government on land usage matters. These Committees will be composed of appropriate Government officers and representatives of local farmers. One such committee was established in Arusha in May. This action by the Tanzanian Government will give a good deal more confidence to the farmers who are there. This is what we were anxious to achieve.

Zambia (Defence Base)

Mr. Jackson: asked the Secretary of State for Commonwealth Relations what representations he has received from the Government of Zambia for the establishment of a United Kingdom defence base in that country in the event of a threat to its economic or political well-being; and what reply he gave.

Mr. Bottomley: None, Sir.

Mr. Jackson: In view of the possibility of illegal action by the Rhodesian Government, such as the declaration of unilateral independence, will my right hon. Friend assure our friends in Zambia that, should the position of the Zambian Republic be affected, either economically or in a defence sense, we would at once come to their assistance?

Mr. Bottomley: My hon. Friend will appreciate that that is a hypothetical question. I prefer to say nothing further.

Mr. Gower: Is it not inconceivable that anybody in a United Kingdom Parliament, whatever the merits of the problem of Southern Rhodesia, should

contemplate an establishment of this kind in Zambia, which could only be directed against Southern Rhodesia, against our kith and kin there who came to our aid as recently at 1939?

Mr. Goodhew: Is the Secretary of State aware that in an earlier answer this afternoon he gave great cause for concern by talking about resort to warfare where negotiations broke down? Perhaps he would now like to explain to the House what he meant.

Mr. Bottomley: I did not say anything at all about warfare resulting from a breakdown in negotiations. What I said was that when there is a question of war or peace one always tries to negotiate without violence of any kind. It was in this sense that I referred to peaceful negotiations.

Kashmir Dispute

Mr. Jackson: asked the Secretary of State for Commonwealth Relations whether he will now consider a fresh initiative in an attempt to resolve the Kashmir dispute.

Mr. Bottomley: I have nothing to add to the reply which I gave to the hon. Member for Torquay (Sir F. Bennett) on 30th March.

Mr. Jackson: In view of Her Majesty's Government's success in bringing about a peaceful conclusion to the Rann of Kutch dispute, would not my right hon. Friend treat as a matter of urgency the possibility of a new initiative over Kashmir, in view of the appalling defence and financial costs to both countries of that crisis?

Mr. Bottomley: I thank my hon. Friend for his comments about the satisfactory settlement of the Rann of Kutch dispute and the part played by Her Majesty's Government. I accept that this has created the right kind of atmosphere for further negotiations to develop between India and Pakistan, but this is a matter for those two countries in the first instance. As with the Rann of Kutch, British help would always be available if required.

Sir F. Bennett: Why does the Secretary of State find it so easy to be so pleased, with full justice, about what has


happened in the Rann of Kutch but so reluctant to try to get at the basis of the trouble between the two countries, which is Kashmir? He must be as well aware as anyone in the House that all these other matters are merely symptoms of the basic malaise. Why does he not say something a little more encouraging about a new initiative?

Mr. Bottomley: I repeat that the initiative must come from the two countries concerned. This has been a long-standing problem. The fact that there has been a peaceful settlement over the Rann of Kutch leads one to hope for greater success in the future.

Mr. Longden: Will the right hon. Gentleman make clear that he considers it infinitely preferable that inevitable change in this as in other parts of the world had much better be brought about gradually than as a result of a bloodbath?

Commonwealth Secretariat

Mr. Sandys: asked the Secretary of State for Commonwealth Relations if he will make a statement about the functions of the Commonwealth Secretariat.

Mr. Bottomley: I would refer the right hon. Member to paragraphs 3–22 and 27–30 of the Agreed Memorandum on the Commonwealth Secretariat which was issued along with the Final Communiqué of the Prime Ministers' Meeting.

Mr. Fisher: While appreciating that the Secretariat is likely to expand, could the right hon. Gentleman give the House some idea of the initial size of the Secretariat, both as regards numbers of the staff and the total cost to the various Commonwealth countries?

Mr. Bottomley: There is an Agreed Memorandum which we shall publish tomorrow in the form of a White Paper.

Commonwealth Economic Consultative Council (Ministerial Meeting)

Mr. Sandys: asked the Secretary of State for Commonwealth Relations when it is proposed to hold the next Ministerial meeting of the Commonwealth Economic Consultative Council.

Mr. Cledwyn Hughes: Arrangements are in train for the next Ministerial meet-

ing of the Commonwealth Economic Consultative Council to be held towards the end of September in Kingston, Jamaica. It will be the meeting of Finance Ministers that normally takes place each year before the meetings of the International Monetary Fund and the International Bank for Reconstruction and Development.

Mr. Sandys: Can the Minister of State say whether, as usual, trade matters will not be discussed at this meeting? If so, in what way will the proposed Conference of Commonwealth Trade Ministers perform a function which is not normally performed by the regular meetings of Commonwealth Economic Ministers through the Economic Consultative Council?

Mr. Hughes: As the right hon. Gentleman is aware, the Commonwealth Prime Ministers agreed that discussions should be arranged between officials of Commonwealth Governments in the first instance to examine the issues further and prepare for an early meeting of Commonwealth Trade Ministers. The meeting to which we are referring, and which is to be held in Jamaica, is the normal meeting of the Finance Ministers that precedes the I.B.R.D. and International Monetary Fund meetings.

Mr. Sandys: Is the Minister not aware that these meetings normally deal with trade matters and also that there are regular meetings of Commonwealth Trade Ministers? Can he tell us in what way this new proposal will do something different from what has been done previously through the ordinary and regular channels?

Mr. Hughes: The right hon. Gentleman will be aware that as a result of the initiative of the Prime Ministers' meeting, the purpose of the meeting of trade Ministers which will follow the meeting of officials will be to expand Commonwealth trade, a matter upon which I should have thought hon. Members in all quarters of the House would agree.

Mr. Biggs-Davison: What part will the Commonwealth Secretariat play in the preparation of these meetings and what is to happen to the Commonwealth Economic Committee?

Mr. Hughes: The part that the Commonwealth Secretariat will play in the meeting of the Commonwealth Economic Consultative Council is, as the hon. Gentleman will know, set out in the Agreed Memorandum attached to the official communiqué of the Commonwealth Prime Ministers' meeting, but it is rather too early to say whether the Secretariat will be in operation by the date of the September meeting in Kingston, Jamaica.

Maldive Islands

Mr. Alison: asked the Secretary of State for Commonwealth Relations if he will make a statement on the progress of his negotiations regarding the Maldive Islands.

Mr. Bottomley: The negotiations for a revision of the Anglo-Maldivian Agreement are progressing favourably, and I hope to be in a position to announce their satisfactory conclusion to the House very shortly.

Mr. Alison: While thanking the right hon. Gentleman for that reply, may I ask him if he can assure us that a satisfactory conclusion will include the safeguarding of our R.A.F. bases at Gan?

Mr. Bottomley: Negotiations have been confidential and I would not like to reveal the terms at this stage. However, they are satisfactory to us and, we have every reason to believe, to the Maldivian Government.

Oral Answers to Questions — MINISTRY OF POWER

Steel Industry (Nationalisation)

Mr. Edward M. Taylor: asked the Minister of Power when he will introduce the Bill relating to the nationalisation of the steel industry; and if he will make a statement.

The Parliamentary Secretary to the Ministry of Power (Mr. John Morris): I have nothing to add to the statement made by my right hon. Friend the Prime Minister on 24th June, 1965.

Mr. Taylor: Is the Parliamentary Secretary aware that this rather ambiguous Answer conflicts strongly with the Prime Minister's statement in the House on 18th March that steel would be nationalised this Session? Does he not think it is un-

reasonable and outrageous to expect the industry to continue operating under this difficulty? Will he not state clearly and precisely whether or not it is the intention of the Government to bring in a Bill to nationalise steel?

Mr. Morris: I have no evidence that the normal operations of the industry are not proceeding smoothly. If the hon. Gentleman has any evidence to the contrary I shall be very interested to hear it. As to the earlier part of the question, my right hon. Friend the Prime Minister made abundantly clear on 24th June what the situation was. He referred to the amount of legislation before the House this Session and said further that it would be a matter of convenience whether to extend this Session to get this and other necessary legislation through or whether to
make a clean start with an early new Session".—[OFFICIAL REPORT, 24th June, 1965; Vol. 714, c. 1939.]

Mr. H. Hynd: Will my hon. Friend note the impatience of the Opposition in this matter and do his best to bring in this Bill as soon as possible to meet their desire?

Mr. Morris: I appreciate that some right hon. and hon. Members opposite have been appointed to shadow my right hon. Friend and myself. I always have great sympathy with the unemployed, especially those genuinely seeking work.

Mr. Peyton: Is the hon. Gentleman aware that there is no impatience on this side of the House to find ourselves confronted with the horrid Measure with which the Government have threatened the country and the industry? Is he also aware that we do not share the illusion, which he evidently does, that the Prime Minister ever makes anything clear? Will he kindly bear in mind that though we are prepared to wait for ever, we are nevertheless optimistic enough to expect that every now and again—

Hon. Members: Ask a question.

Mr. Peyton: I am asking a question.

Mr. Speaker: Let there be less noise or we shall never get to this Bill.

Mr. Peyton: I am simply concerned to find out whether the Parliamentary Secretary can answer my hon. Friend's


question which was quite simple: yes or no, do the Government intend to introduce this horrid Measure?

Mr. Morris: I thought I had made the matter abundantly clear. As my hon. Friend indicated on 24th June, it will be a matter for the convenience of the Government whether the Bill will be introduced this Session or whether we shall have a clean start with an early new Session.

Gas and Electricity (Capital Costs)

Mr. McNair-Wilson: asked the Minister of Power what are the capital costs of making gas and electricity per unit of installed capacity by the latest processes available to both industries, including coal-fired, oil-fired and atomic-powered in the case of electricity generation, and oil reforming in the case of gas making.

Mr. John Morris: Typical construction costs of large power stations now being built are about £40 per kw (sent out) for coal and oil-fired stations and about £100 for nuclear power stations of the Magnox type. No comparable figure can be given for a nuclear power station incorporating advanced gas-cooled reactors until contract negotiations for Dungeness "B" power station have been completed. A typical capital cost of making gas from oil reforming plant is £10 per therm day, or £8 per kilowatt equivalent.

Mr. McNair-Wilson: In view of these very complicated and important figures which the hon. Gentleman has just given us, may I ask when we can expect a detailed statement from the Government of their fuel policy setting out the comparative figures right across the industry?

Mr. Morris: My right hon. Friend, in conjunction with his Energy Advisory Council, is working on all aspects of fuel policy.

Electricity Industry (Restrictive Practices)

Mr. Goodhart: asked the Minister of Power what restrictive practices within the electricity industry have been abandoned by agreement during the past six months.

Mr. John Morris: The abandonment of any restrictive practice relating to employment in the electricity supply industry would be a matter for negotiation between the electricity boards and the trade unions and not one for which my right hon. Friend has responsibility.

Mr. Goodhart: Is the Parliamentary Secretary aware that the London Electricity Board recently had to send no fewer than 14 employees to install one refrigerator in the house of one of my constituents? Is he aware that the chairman of the Board wrote to me saying that this was due entirely to restrictive practices? What progress has been made to try to solve this nonsense?

Mr. Morris: The issue raised by the hon. Member is a matter for the day-to-day management of the Board [H.Ms: "Oh."] As for the progress that has been made, the recent agreements with manual workers have created a climate whereby management in conjunction with the unions and employers can gradually eliminate any obstacle which may still exist to the improvement of efficiency. As I said in reply to the hon. Member on 6th April, considerable progress has been made in carrying out the agreements.

Mr. Godber: Would not the hon. Gentleman agree that, whatever matters are for day-to-day management, the Government are under an obligation to see that where there are restrictive practices of that kind steps are taken to eliminate them?

Mr. Morris: Yes, Sir, and we shall take them.

Gas and Electricity (Housing Estates)

Mr. Ridley: asked the Minister of Power if he will make a statement about the terms under which the gas and the electricity board are to be allowed to compete for business on new housing estates.

Mr. John Morris: My right hon. Friend will do so as soon as he is ready.

Mr. Ridley: Although we have no objection to the hon. Gentleman's right hon. Friend trying to define the ground rules under which the two boards are to operate, may I ask the hon. Gentleman


whether he will undertake to the House that he will do nothing which will restrict competition between these two rival fuel industries?

Mr. Morris: Some competition between the fuel industries is inevitable and, indeed, very desirable, but there must be co-operation between nationalised industries and that should be in the consumers' interests. All I would say is that my hight hon. Friend is as anxious to find an early solution to this problem as he was in the matter of the resale of electricity, where people were finding themselves in difficulty when there were unscrupulous landlords who were taking advantage of them.

Oral Answers to Questions — COAL

Opencast Mining (West Midlands)

Mr. Gibson-Watt: asked the Minister of Power what proposals for new opencast coal mining in the West Midlands have now been put to him; if he will give details of the proposals and of his decisions on them.

Mr. John Morris: The National Coal Board's application for an authorisation to work the Orchard St. Leonards site in Warwickshire is the only one at present before my right hon. Friend. Objections have been lodged and arrangements have been made to hold a public inquiry, which opens today.

Mining Industry (Manpower)

Mr. McNair-Wilson: asked the Minister of Power if he will give the shortfall in the number employed in the coal mining industry.

Mr. John Morris: This is a matter for the National Coal Board. My right hon. Friend understands from the Board that its operating plans are made in the light of the men available, that the labour force is at present about 5,000 below the Board's manpower budget for 1965–66, but that production has been maintained at a level sufficient to meet overall demand.

Mr. McNair-Wilson: While realising the social problems involved, may I ask the Parliamentary Secretary to tell us whether, in view of the new plans for the

coal industry, there is any plan in the Government's mind for redistributing employees from uneconomic to economic areas of the industry?

Mr. Morris: That is a matter for the National Coal Board.

Anthracite Coalfield, South-West Wales

Lady Megan Lloyd George: asked the Minister of Power if he will make a statement on the prospects of continued employment in the anthracite coalfield in South-West Wales.

Mr. John Morris: The prospects in this and other coalfields are among the subjects which my right hon. Friend is at present discussing with the National Coal Board in connection with a co-ordinated fuel policy. He is also in constant touch with my right hon. Friends the First Secretary of State and the Secretary of State for Wales about related questions of economic and social planning.

Lady Megan Lloyd George: Can my hon. Friend say to what extent the supply of anthracite falls below the demand? In view of the clean air policy, can he give an assurance that steps are being taken to ensure an adequate supply of smokeless fuels?

Mr. Morris: I cannot give any figures to my hon. Friend without notice, but I am assured that there are ample supplies of smokeless fuels.

NUCLEAR TEST BAN TREATY

Mr. Blaker: asked the Prime Minister what proposals Her Majesty's Government now have for a comprehensive nuclear test ban treaty; and if he will make a statement.

The Prime Minister (Mr. Harold Wilson): My noble Friend the Minister of State for Foreign Affairs, Lord Chalfont, told the Disarmament Commission in New York in April that we should like to work out an agreement in the Eighteen Nation Disarmament Committee at Geneva on the means of detection and identification of underground tests. This is the main difficulty in the way of a comprehensive test ban treaty. The Disarmament Commission in its final


resolution supported a return to Geneva for this purpose.

Mr. Blaker: Is the right hon. Gentleman aware that Sir John Cockcroft, who is a member of the Advisory Panel on Disarmament set up by the Minister of State who is responsible for disarmament matters, has recently expressed the opinion that the political advantages of a comprehensive test ban treaty without on-site inspection now outweigh any military risks that would be involved? Do the Government agree with that view, and may we expect them to put forward new proposals for a comprehensive test ban treaty soon?

The Prime Minister: I am well aware of the statement made by Sir John Cockcroft, and he makes these statements with very great authority. Our view—the advice we have—is that there has been a great advance in methods of external verification in the last year or two, but we have not yet reached a point where we can safely rely on external verification being able to distinguish between a nuclear explosion and, say, a chemical explosion of equal power.

Sir Alec Douglas-Home: Will the right hon. Gentleman recollect that about two years ago we made a proposal to the Russians that Russian, British and American scientists might meet together to consult on this subject to see whether any modifications could be made on previous experience? Does the right hon. Gentleman think that it is worth resurrecting this proposal?

The Prime Minister: Yes, Sir, and also the proposal which the right hon. Gentleman will remember I put to him that it might be a good idea, if Russian scientists are positive that they can be externally verified, that we should arrange one or two small staged tests at times known only to the Secretary General of the United Nations to see if the Russians are successful in detecting them from outside. It would be useful to get scientists together for this kind of purpose, but so far we have not succeeded in doing it.

Mr. A. Henderson: In view of the progress which appears to have been made in the science of detecting and verifying underground explosions, may I ask

my right hon. Friend whether he will see that Her Majesty's Government will not go into the forthcoming disarmament discussions bound to the proposals of the previous Government that there should be at least seven on-site inspections, and that they will be prepared to consider a much smaller number with a view to securing an overall agreement?

The Prime Minister: As soon as we are satisfied, which we are not vet, that it is safe to do this without any on-site inspections, we will be prepared to say so and support a treaty to that effect. As to the number of inspections, I think that in the talks which were going on with the Soviet Union two years ago there was a suggestion to reduce that figure below seven, and then there was a change of direction in favour of the more limited test ban treaty. We are not tied to a particular figure and we shall certainly be prepared to go to Geneva hoping to get a solution which would be universally accepted.

Mr. Mendelson: During the weeks of preparation before the next stage, will my right hon. Friend bear in mind the authoritative opinions expressed in Washington in recent weeks by the Kilpatrick Committee, set up by Senator Kennedy, that we should not do anything to give priority in any reorganisation in N.A.T.O. to nuclear arms control which later might be a hindrance in arriving at wider agreements between East and West which would be a guarantee of peace?

The Prime Minister: I agree that the report by the Committee headed by Mr. Kilpatrick is a vitally important report. We have put forward ideas of our own, and some were incorporated in the Commonwealth Prime Ministers' agreed communiqué, for a non-dissemination agreement. Certainly the points put forward by my hon. Friend and by the Kilpatrick Committee will be borne in mind.

BATTLE OF HASTINGS (900th ANNIVERSARY)

Mr. Onslow: asked the Prime Minister what arrangements are being made for the celebration of the 900th anniversary of the Battle of Hastings.

The Prime Minister: I have as yet nothing to add to the Answer given by my hon. Friend the Joint Under Secretary of State in the Home Office on 1st July to a Question by the hon. Member for Hastings (Sir N. Cooper-Key).

Mr. Onslow: Is the right hon. Gentleman aware that most people see no need for any special expensive arrangements, but that just as the Finance Bill is a more than adequate commemoration of the Great Plague of 1665, so his apparent intention to cling to office until 1966 will give the people of this country an excellent chance of delivering another one in the eye for Harold?

The Prime Minister: I read the same joke in the Press two or three weeks ago. I assure the hon. Gentleman that he is getting his history a bit mixed. The Harold who, in the words of the bard, got "his eye full of arrow" was, in fact, Harold Macmillan at the hands of the French two years ago.

Mr. Grimond: If there is to be a celebration, may we take it that President de Gaulle will the principal guest at this commemoration of a quite notable defeat of the Anglo-Saxons?

The Prime Minister: As one of my hon. Friends has said, we are awaiting the programme that a committee of the south-east of England is preparing. I thought that it might be helpful, and we might be able to secure the attendance of the French President, if we were to link the two celebrations, the one which has been mentioned in the Question and, perhaps, the 550th anniversary of Agincourt on 25th October this year.

Mr. Rankin: As the Government's policy is a policy of peace, would it not be better to forget, or try to forget, these bloody episodes of the past and concentrate on such happy peace-making events as the union of the Scottish and English Crowns, which brought great happiness to England, and also the union of the Scottish and English Parliaments, which brought even greater happiness to England?

The Prime Minister: I am not sure whether it was my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) or another of my hon. Friends who was very

anxious last year that we should celebrate that anniversary of Bannockburn.

Mr. Rankin: Hear, hear.

The Prime Minister: Perhaps we can leave this matter now happy that we celebrated the Anglo-French occasion of the Simon de Montfort Parliament. In any case, all of us are well aware of the great benefits of the Act of Union with Scotland in that it produced, if nothing else, the Scottish Grand Committee.

DEPARTMENT OF ECONOMIC AFFAIRS (PARLIAMENTARY UNDER-SECRETARY)

Sir F. Bennett: asked the Prime Minister whether he will appoint an additional Parliamentary Under-Secretary of State in the Department of Economic Affairs.

The Prime Minister: No, Sir.

Sir F. Bennett: Will the Prime Minister consider this again? Does he realise that but for a very handsome apology, which we all appreciate, which has just appeared on the tape, my supplementary question would have been very different? I content myself today with expressing the hope that henceforth there will be rather fewer of these weekend diatribes and more concentration by the First Secretary of State on his duties.

The Prime Minister: As the hon. Gentleman's Question has been down for about eight weeks, I congratulate him on the prescience with which he formulated his supplementary question at that time. But I must restrain the enthusiasm of the hon. Gentleman and his hon. Friends for trying to increase the number of Ministers.

FOREIGN OFFICE AND COMMONWEALTH RELATIONS OFFICE

Mr. David Steel: asked the Prime Minister whether, following the creation of a unified diplomatic service and in view of the proposed setting up of a Commonwealth Secretariat, he will now consider merging the Foreign Office and the Commonwealth Relations Office.

The Prime Minister: No, Sir.

Mr. Steel: Does the Prime Minister realise that by creating a unified Ministry of External Affairs he would bring Britain into line with all the other members of the Commonwealth and greatly assist the smooth running of our external relations without detracting in any way from our belief in the Commonwealth as an institution?

The Prime Minister: When the Plowden Committee, which led to the amalgamation of the diplomatic service, reviewed this possibility it recommended against any such amalgamation on the ground that it could be misinterpreted as implying a loss of interest in the Commonwealth partnership. Quite enough has happened in the last two or three years to give support to those who may feel that there is a loss of interest in the Commonwealth partnership, and I agree with the Plowden Report. That is why I rejected the hon. Gentleman's suggestion.

Sir G. de Freitas: Will the Prime Minister emphasise that the comparison in the Question between the Commonwealth Relations Office and the new Secretariat could do a lot of harm to the new Secretariat since the Commonwealth Relations Office exists to serve British Government policy whereas the new Secretariat serves all Commonwealth countries?

The Prime Minister: That is absolutely right, and anyone who reads the Commonwealth communiqué will feel that that is the position of the Secretariat.

STANDING SECURITY COMMISSION (MEMBER'S LETTER)

Commander Courtney: asked the Prime Minister on whose authority the letter, dated 4th March, from the hon. and gallant Member for Harrow, East, addressed to the Standing Security Commission was referred to the Foregn Office; and what action he intends to take on the recommendations put forward in this letter.

The Prime Minister: No special authority was needed. The hon. and gallant Member's letter was replied to

by the Foreign Office because its subject matter was more its concern than that of the Standing Security Commission. The recommendations it contains are being studied afresh, but I can hold out little hope that they will in fact prove acceptable.

Commander Courtney: Can the Prime Minister tell me when I shall receive a reply from the Security Commission itself, to which I addressed the letter? In the light of the past 15 years, is he really leaving it to the Foreign Office to be judge and jury in its own case in these important security matters?

The Prime Minister: The hon. and gallant Gentleman, whose deep concern in these matters we all know, will realise that the Security Commission is an independent body, and it is extremely important that it should be allowed to act on its own without interference from political sources, Government, Opposition or anything else. I understand that, in fact, he sent his letter to one member of the Security Commission who, if I may say so, appropriately passed it to the secretary who decided that it was a matter for the Foreign Office since it raised matters within the field of the Foreign Office and not within the Security Commission's terms of reference. He will recall, as I had a long discussion with him about this matter, that I have asked him for any further suggestions which we might be able to consider.

Sir Alec Douglas-Home: I am glad that the Prime Minister added what he did in the last sentence of his reply. Will he look at this procedure again? My hon. and gallant Friend wrote a quite important letter to the Security Commission. It was handed on to the Department which was interested in the particular points which he raised. I should have thought that it might have gone to the Prime Minister or, indeed, that the Security Commission might have dealt with it on its own without referring it to the Department which was to some extent criticised in my hon. and gallant Friend's letter. Perhaps the Prime Minister would look at it again.

The Prime Minister: The right hon. Gentleman himself set up the Security Commission. I hope that he is not now criticising the procedure which was


followed in respect of a letter received by a member of the Commission. I think that it would be quite wrong for us to start giving instructions to the Commission about how it does its business. Its independence is something to which both sides of the House have attached great importance.
As regards the recommendations in the letter, I think that many of them are recommendations which have frequently been put by the hon. and gallant Gentleman to my predecessors as Prime Minister and, quite frankly, nothing has been done about them. I think that that is his complaint. I rather agree with my predecessors on most of the recommendations, but I have indicated to the hon. and gallant Gentleman that I am prepared to discuss these ideas that he has at any time.

Sir Alec Douglas-Home: The Prime Minister quite rightly says that this Commission is independent, but it did immediately react to my hon. and gallant Friend's letter by sending it to the Foreign Office. This does not look very much as though it thought it was independent and able to deal with it independently. I am only asking the Prime Minister to look at the subject again, and this matter in particular.

The Prime Minister: This must be a matter for the Commission. If the Commission is to be told, instructed or asked, if it receives letters from Members of Parliament, that it must not pass them forward, it will cease to be independent. I agree that there are difficulties here. I agree that there are problems raised by the hon. and gallant Gentleman's letter. But I think that the right thing for him to do is to correspond with Ministers when he wants action taken by Ministers. If he wants me to act, he should write to me. Where he thinks that there is a point within the terms of reference of the Commission in any particular case, it is right to send it to the Commission, but the Commission must decide what to do with it.

Mr. Lipton: May the House be told what all this mumbo-jumbo is about? If it is important, we ought to know. If it is not important, let us not waste time with it.

The Prime Minister: These matters are important, but so is the independence of the Commission.

Sir D. Renton: The right hon. Gentleman has twice mentioned that my hon. and gallant Friend sent a letter to a member of the Security Commission and he described the secretary as a member of the Commission. Would he confirm that he is quite right about that? Surely the secretary is not a member of the Commission? If an hon. Member of this House wishes to write to the Commission, is not his right course to write to the secretary?

The Prime Minister: I did not say that the secretary was a member of the Commission. I said that the hon. and gallant Gentleman wrote to a member of the Commission and that it was the secretary of the Commission who then passed the letter on to the Foreign Office. I think the secretary acted perfectly properly. These matters must be for the Commission whenever it receives letters.

BALLOT FOR NOTICES OF MOTIONS

Postal Giro Service

Mr. H. Hynd: I beg to give notice that on Wednesday, 21st July, I shall call attention to the possibility of introducing a postal giro service, and move a Resolution.

Parliamentary Procedure (Reform)

Mr. Gregory: On behalf of my hon. Friend the Member for Wandsworth, Central (Dr. David Kerr), I beg to give notice that on Wednesday, 21st July, he will call attention to the need for the reform of Parliamentary procedure, and move a Resolution.

Agricultural Land

Mr. Pym: I beg to give notice that on Wednesday, 21st July, I shall call attention to the need to retain good agricultural land for the farming industry, and move a Resolution.

COMPLAINT OF PRIVILEGE

3.33 p.m.

Mr. Speaker: Yesterday, the hon. Baronet the Member for Manchester, Withington (Sir R. Cary) made a complaint to me of breach of privilege founded on words which the Chancellor of the Exchequer was reported to have used in a speech at Swansea as set out in the Daily Telegraph of 5th July. They were read to the House.
I have considered the hon. Member's complaint. In my view, it does raise a prima facie matter of privilege.

The Chancellor of the Exchequer (Mr. James Callaghan): Mr. Speaker, I am sure that you have ruled on the hon. Baronet's complaint in accordance with precedents. He has made a very serious charge. It is 20 years since I was elected to the House of Commons—[Interruption.] Before this matter is committed to the care of the House I am empowered and entitled under normal custom to make a statement on it. I repeat that it is 20 years since I was first elected to the House of Commons—yesterday—and I never expected to have a charge like this made against me. However, it has been made.
I have spent most of my adult life in this House, and in these circumstances I feel that I should say to the House that I have always been very proud of my membership of it and have always felt that one of the greatest things that one could do was to become a Member of the House of Commons. I feel that very much indeed now. Therefore, I should like to take the opportunity forthwith, at the earliest opportunity that I have, of saying that nothing in my speech at Swansea was designed, intended, or meant to reflect upon the House of Commons—nothing at all.
It is now for the House to decide what it chooses to do. In accordance with usual practice, I propose, with your permission, Mr. Speaker, to withdraw from the Chamber.

3.35 p.m.

The Lord President of the Council (Mr. Herbert Bowden): In view of your Ruling, Mr. Speaker, it falls to me, as the Leader of the House, in accordance with past practice, to move,

That the matter of the complaint made by the hon. Baronet the Member for Manchester, Withington (Sir R. Cary) of passages in the speech of the Chancellor of the Exchequer at Swansea on 3rd July, reported in the Daily Telegraph on 5th July, be referred to the Committee of Privileges.
It would, I think, be in the interests of the House as a whole now if it were decided that no further debate should take place at this stage.

Mr. William Hamilton: On a point of order, Mr. Speaker. May I seek your help and guidance? Can you tell me how an hon. Member can get an invitation to give evidence in front of the Committee of Privileges, because I have some very interesting evidence that I should like to give in support of the Chancellor?

Mr. Speaker: That will be a matter for the Committee if and when the matter is referred to it. At present, the Question before the House is the Motion just proposed by the Leader of the House.

Mr. Selwyn Lloyd: I think that this is the right course to take, Mr. Speaker, and that it would be very much better that no further comment should be made at present.

3.37 p.m.

Mr. Michael Foot: I fully appreciate the appeals that have been made on both sides of the House that this Question should not be debated, but this is a debatable Question, and I hold the opinion very strongly that I am doubtful whether it is correct, right and wise in the interests of the House of Commons that Motions moved by the Leader of the House in circumstances such as these should be accepted by the House without discussion, as we have been invited to do.
As I understand it, the position is that you, Mr. Speaker, have ruled that a case brought to your attention constitutes a prima facie case of breach of privilege. It is then open to the House of Commons to say, first, whether it agrees with your view that it does constitute a prima facie case, and if the House decided that it did not constitute a prima facie case of breach of privilege that would not be a reflection upon you but would merely mean that the House was holding and stating a different view from the one you had stated. So, first, I say that obviously the procedure is such—it is evident and cannot be disputed—that it is quite open


to the House of Commons to say that it dissents from your view that certain words constitute a prima facie breach of privilege.
My second point is that it is perfectly open to the House of Commons also, after you have ruled, Mr. Speaker, that a matter does constitute a prima facie case of breach of privilege, to say, "Well, even though we may think that it does, we still think that it would be wrong or inadvisable for the matter to be referred to the Committee of Privileges". On either of those two grounds, or on other grounds, it is open to Members of the House to argue that a matter should not be referred to the Committee of Privileges.
Further, I also think that it would be a very serious interference with the proper rights of this House if it were accepted that when the Leader of the House or others propose, following a Ruling by Mr. Speaker, that a matter should be referred to the Committee of Privileges, that should be accepted as automatic by the House of Commons. I think that we all have a right to give our views on this matter, particularly as any question of privilege is not in any sense whatsoever a party matter. It is entirely a matter for the House of Commons and for individual Members as Members of the House.
In this case, concerning what the Chancellor of the Exchequer has said, I must say that I was extremely doubtful whether the matter should be referred to the Committee of Privileges when I first heard it. I am even more doubtful after I have heard the dignified statement by the Chancellor of the Exchequer on the subject today. Moreover, when I look at the statement that has been made by the Chancellor of the Exchequer, I think that those who say that this constitutes a prima facie breach of privilege, and who claim that they are injured, are showing themselves extremely thin-skinned, and that if such matters were referred to the Committee of Privileges, and, even worse, if they were automatically referred to the Committee of Privileges without any debate, it might injure the whole process of free speech both within this House and outside it.
I think that the speech on Saturday by the Chancellor was admirable. It showed his usual care for accuracy com-

bined with a remarkable degree of moderation—two qualities which I always admire. I have listened to a number of speeches in defence of the Finance Bill and I think that my right hon. Friend's was the best of the lot. It would, therefore, be very difficult for me to concur with a suggestion that this matter should be referred to the Committee of Privileges.
I should be very surprised if all other hon. Members were to agree that the matter should be referred to the Committee. During recent months we have had several debates on the question whether matters should be referred to the Committee. A few weeks ago, there was the case raised by my hon. Friend the Member for Ashfield (Mr. Warbey), in the debate in which I participated. I must say that I was in two minds about the arguments then, as I tried to reveal. I thought that very powerful arguments were applied during the debate against the proposition that some of us were arguing that the matter should be referred to the Committee.
But, whoever was right or wrong, I think that if this House decides that the matter raised against my hon. Friend the Member for Colne Valley (Mr. Duffy), who had referred to the condition of sobriety in which hon. Members always attend the House, and this matter, involving the Chancellor of the Exchequer, should be referred to the Committee but that the matter raised by my hon. Friend the Member for Ashfield—following, in my opinion, an attempt to reflect upon his political honour as an hon. Member—should not be referred to the Committee, we shall be getting into an extraordinary state of affairs.
The best solution is the one I was diffident enough to suggest at the time of the earlier debate—that we should try to reduce the number of privilege cases generally. I thought that a large number of hon. Members on both sides of the House, irrespective of party, concurred with that view. The right hon. Member for Enfield, West (Mr. Iain Macleod), for example, did not attend that debate, but wrote a most powerful article in his journal, the Spectator, in which he said that we must be most sparing and reluctant in referring any matters to the Committee of Privileges and invoking the question of privilege.
I hope that we shall have his support on this occasion, but I also hope that, because we have his support, it will not deter all the other hon. Gentlemen opposite from coming with us. I think that the right hon. Gentleman still has a few followers left and we would like to have the whole lot in the Lobby with us. If the right hon. Gentleman would be prepared to act as Teller with me, I would be gratified for that very brief association.
I suggest seriously to the House that it would be very much better not to refer this matter to the Committee of Privileges. Then the matter could be argued out. If hon. Members do not like the Chancellor's statement, I gather that there is a little time left on the Finance Bill in which they can argue it out. If they do not like his arguments, let them produce better ones. If they do not like his invective, let them produce better invective. The right hon. Member for Enfield, West has tried his hand at it. There should be some competition in these matters. I am not in favour of competition at all times, but let there be competition in argument, in invective, but not competition in trying to send issues to the Committee of Privileges.
Let us consider what will happen if this matter is referred to the Committee. The Committee may, in its wisdom, come to exactly the view I hold. I would not rule that out; indeed, I cannot understand why the Government have not made me a member of that Committee already, for I would rather be a member of it than of the Select Committee on Procedure. If the Committee does come to my view that this is not a case of privilege, the whole thing will be finished and we shall be back where we are now.
The Committee may say, on the other hand, "We think that, in a technical sense, this is a breach of privilege, but we recommend that nothing should be done about it." In that case, all the time of many of the most eminent of right hon. and hon. Members will have been wasted to no result whatever and the only conceivable result, as far as I can see, is that marginally we shall have injured the whole acceptance of what can be freely said both in debate in this House and at large in the country.
So, if there is any other hon. Member on either side of the House—and I even

accept a Liberal for this purpose—who is prepared to tell with me against this Motion, I will tell against it—and I hope that a majority of hon. Members, as individual hon. Members, will, in the interests of free speech, throw out the Motion.

Mr. Sydney Silverman: On a point of order, Mr. Speaker. Reference has been made by both my right hon. Friend the Leader of the House and by my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) to your having ruled that there is a prima facie case. Surely a prima facie case involves a value judgment, and assessment. Am I not right in thinking that your Ruling does not involve any such thing and that Mr. Speaker's Ruling on these questions never has involved any such Ruling?
Am I not right in saying that this decision means that there is sufficient in the point to enable the Motion which my right hon. Friend has moved to take precedence over the rest of the business of the day and that your Ruling does not involve any opinion at all, one way or the other, as to whether this is a matter of breach of privilege?

Mr. Speaker: It is not for the Chair to rule whether any breach of privilege has occurred or no. The whole effect of its ruling about a prima facie case is to give to the complaint in question precedence over the Orders of the Day. That is all.

3.46 p.m.

Mr. Emlyn Hooson: I entirely agree with the view expressed by the hon. Member for Ebbw Vale (Mr. Michael Foot). I think that the House is far too sensitive about these matters. Far too many matters are being referred to the Committee of Privileges. It is incumbent upon the House to take a far more robust view and to have competition in invective, and so on, as the hon. Member suggested.
I say across the Floor of the House that I am prepared to join the hon. Member in telling against the Motion.

3.47 p.m.

Mr. R. T. Paget: I also support my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot). As I understand it, the gravamen of the charge against the Chancellor is that he said that


certain hon. Members spoke for interests when those interests were effected in the passing of the Finance Bill. Does anybody doubt that that is true? Of course it is—and what is wrong with it?
There are various of my hon. Friends, for instance, who speak for the interests of the National Union of Mineworkers when its interests are affected. Does anybody doubt that? Equally, does anybody doubt that there are hon. Members who put the bookmakers' point of view when the interests of bookmakers are affected? Does anybody doubt that there have been hon. Members who have put the Stock Exchange's point of view, or the point of view of finance?
What is wrong with this? For us to proceed, as we are asked to do, to refer as a breach of privilege a statement which in our hearts we all in this House know to be true is to make a fool of the House, and we should not do it.

3.50 p.m.

Mr. Leslie Hale: I agree so much with every word said by my hon. Friend the Member for Devonport—[Laughter]. I should have said my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot). Perhaps my lapse of memory was because the last time I was a Teller with him was when he was the Member for Plymouth, Devon-port and we were telling against a Labour Government. I have only two sentences to add and I say them to hon. Members opposite with sincerity.
For one who has been very active in political and polemical life for 20 years, my right hon. Friend the Chancellor of the Exchequer has a remarkable reputation for not having been accused of making statements normally involving the character or reputation of anyone, and he has a very high reputation for abstaining from anything like the more critical form of polemics.
Secondly, if this matter is to be referred to the Committee of Privileges, and that Committee is to be called upon to look into the accuracy or lack of accuracy of the statement and to hear evidence, only two things will suffer—the dignity and reputation of the House of Commons, and the cause of freedom of speech in this country.

3.51 p.m.

Mr. William Hamilton: I do not care very much whether the issue goes to the Committee of Privileges or not. In some ways I hope that it does, because that will enable some of us to put on record some of the facts to which my right hon. Friend the Chancellor of the Exchequer referred in his speech on Saturday. I was appalled by its moderation.
I have taken the trouble to get in detail the evidence to which he referred in sketch form in that speech and I do not mind very much if the issue goes to the Committee of Privileges. If my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) chooses to vote, I shall vote with him, but if the Motion is defeated, I hope that every hon. Member on this side of the House will take the trouble to get the Sunday Telegraph of 13th June, where he will find a list of hon. and right hon. Gentlemen opposite with vested interests on which they spoke on the Finance Bill time after time. I hope that each of my hon. Friends will go with that list to the research department of the Library where he will get the list supplemented and where the evidence will be enormously increased and that he will then proceed to insist on giving that evidence to the Committee of Privileges, so that we get it on the record properly.
Almost every right hon. Gentleman on the Front Bench opposite is implicated and almost every hon. Member on the back benches opposite is implicated. If this issue is taken to the Committee of Privileges, let hon. and right hon. Gentlemen opposite be warned that we will get all the evidence on the record.
I invite my hon. Friend to take this matter to a Division, in which case I almost hope that he loses.

3.53 p.m.

Mr. J. Grimond: I had certainly not intended to speak on this matter. As a member of the Committee of Privileges, I would have thought it improper to express any view upon a particular matter before the House. [HON. MEMBERS: "Why?"] Because the Committee of Privileges, as has been said, is supposed to some extent to act in a semi-judicial way, and for me


to express an opinion on this case even before it has reached the Committee, if it does, would be improper. There is nothing wrong with that and it seems to me a defensible point of view.
I have sat on this Committee for a very short time compared with some other hon. Members, but I have listened to cases brought by members of the Labour Party against members of the Conservative Party and by members of the Conservative Party against members of the Labour Party.

Mr. Ron Lewis: On a point of order. Is it right for a right hon. Member who is a member of the Committee of Privileges to speak at this time?

Mr. Speaker: The proposition is debatable and nobody is debarred from debating it.

Mr. John Rankin: Further to that point of order. As the right hon. Gentleman whose conduct is under review has had to withdraw, why should not any Member who must sit on this case remain in the Chamber while the discussion is going on?

Mr. Speaker: The Chancellor of the Exchequer acted strictly in accordance with our best traditions and withdrew. His absence does not affect the fact that this Question is debatable.

Mr. Grimond: It is important to distinguish between this and the wider matter of privilege. I believe that there is a widespread feeling in the House that the whole matter of privilege needs to be reexamined, but I doubt whether it should be decided in relation to a particular case. I suggest that the House should consider whether it any longer needs the very wide privileges to which it sometimes lays claim. This is a matter on which a Committee should report to the House, and I think that it will be found that the general feeling of the House is that most of our privileges are now out of date.
The Leader of the House, who is a member of the Committee, has proposed, in accordance with procedure, that this particular matter should be referred to the Committee of Privileges. Although, as a member of the Committee, I would not vote, I would very much regret it if I felt that this particular issue might be

decided on rather party lines which might obscure the very important general point with which I have the widest sympathy. I would strongly recommend the Leader of the House to give some indication that this whole matter of privilege may be reconsidered, because that might go some way to meet what I believe to be the very sincere general feeling of the House that the whole position is unsatisfactory.

3.55 p.m.

Mr. Sydney Silverman: I suggest that my right hon. Friend the Leader of the House withdraws the Motion. I know that if he did so he would not be acting in accordance with what has been the traditional practice, but there is no rule of the constitution that the traditional practice must always be honoured. It is already sufficiently clear from what has taken place that the House is deeply and seriously divided as to whether this matter should go to the Committee of Privileges. A Division has already been promised, or threatened, and I venture the opinion that if a Division is called there will be many many Members who will not feel able to support the Motion which my right hon. Friend has thought it his duty to move.
It is surely not desirable that a matter should go to the Committee of Privileges when there is a very serious division of opinion about whether any privilege is involved. In support of that view, I refer to a case mentioned by my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot), namely, the case of my hon. Friend the Member for Ashfield (Mr. Warbey) on which you ruled, Mr. Speaker, that it was not a matter which could take precedence. However, the Government found time for a Motion which I moved and which suggested that the matter should go to the Committee of Privileges.
On that occasion, there was a very serious debate. The right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) opposed my Motion and the Solicitor-General also opposed it and by a small majority the House decided that it should not go to the Committee of Privileges, although it was common ground that what was challenged was the honour and integrity as to his Parliamentary duties of my hon. Friend the Member for Ashfield.
It is not invariable that the traditional practice is followed. In parallel circumstances, if an hon. Member is in defiance of the Chair, the Leader of the House moves a Motion that the Member be expelled from the House for the time being, suspended. It is common practice that all Members support that Motion, but it has not always happened. In my own case, when I was suspended, the Division was on strict party lines, with all the Labour Party, then in opposition, voting against the suspension and all the Tories voting for the suspension. As the Tories had a majority, the Motion was carried.
But surely this is not the way in which the dignity and rights of the House are properly protected. Matters should go to the Committee of Privileges on two conditions. One is that the Speaker decides, or the House otherwise decides, that the question might raise such a point, and the other is that the overwhelming opinion of the House shares that view. We have the first of those conditions here, but we do not have the second. A great many people may support my right hon. Friend's view, out of loyalty to the Government or out of some sense of confomity, or something of that kind, but a great number will vote against it. Some Liberals will vote against it. I do not know what the Leader of the Liberal Party will do, but he is clearly not happy about it, and I doubt whether anybody in the House is happy about it.
I appeal to my right hon. Friend the Leader of the House to consider this matter, and to see whether he should not withdraw his Motion.

Hon. Members: Vote.

4.1 p.m.

Mr. John Biggs-Davison: I shall not detain the House for more than a minute. I sympathise very much with what has been said by the right hon. Member for Orkney and Shetland (Mr. Grimond), but I would not go quite so far as to say, with him, that nearly all our privileges are out of date. However, they are certainly overdue for reform. I would hope that perhaps from this incident there may come a new impetus towards reform.
I agree with the right hon. Gentleman that it would be quite wrong, in reference to a particular case, to try to change

the rules. What is more, it would be utterly wrong to try to change the rules because a member of the Treasury Bench is involved. [Interruption.] I have not said that anybody has suggested that; I am giving my opinion that it would be wrong for the House to appeal to change the rules in regard to a particular case in which a member of the Treasury Bench was involved. That is all that I wished to say, because the House is impatient to proceed to further business.

4.2 p.m.

Mr. Emrys Hughes: I will not detain the House for very long, except to say that serious students of politics in this country during the last hundred years will wonder why the Chancellor of the Exchequer should be accused of saying anything very new or very outrageous. In my young days, when I first became interested in politics, there was a fierce controversy between the two sides of the House—the Liberals and the Conservatives—about the landlords. When Mr. Asquith was Prime Minister, and Mr. Winston Churchill and Mr. Lloyd George were distinguished members of the Liberal Party, it became almost a platitude to say that Tory Members of the House of Commons represented the great landed vested interests of this country. [HON. MEMBERS: "They still do."] They still may. That is all that the Chancellor has said.
Let me give one more illustration. In those days it was freely alleged that the Tory Party was the party of the brewers. I remember an eloquent speech from Mr. Winston Churchill in which he said that the Tory Party represented a brewer's dray blocking the road to progress. I say that the Chancellor of the Exchequer has merely brought these accusations up to date.

4.4 p.m.

Mr. Eric Lubbock: I agree with my right hon. Friend when he said that at least this case will have done one thing: whereas the last few privilege cases have concerned back-bench Members, and issues of principle have not been ventilated, we are now considering a case that concerns the Chancellor of the Exchequer himself, and when the attention of the House will be focused on the very issue of privilege itself, and the question whether we have not gone too far in this respect.
I also agree with what my hon. and learned Friend the Member for Montgomery (Mr. Hooson) said, namely, that we have become far too sensitive, and that anything which is said relating to the interests of a Member is suspect and can almost automatically be referred to the Committee of Privileges.
I happen to be an engineer, and I often speak in debates on technology with the interests of the engineers in mind. I do not care whether any hon. Member opposite says that I represent the interests of the engineers. I am proud of this. I dare say that many hon. Members opposite who represent coal-mining constituencies, for example, are proud to have it said of them that they stick up for the interests of the coal miners in this House or outside. I cannot understand why any hon. Member should complain when it is said of him that he represents investments trusts, or the holders of gilt-edged securities.
During the last few days we have been discussing nothing but the Rent Bill, and it has been said, not once but time and again, that the Opposition Front Bench represents the interests of the landlords. We do not have to look back to the time of Lloyd George or Asquith to find examples of the kind mentioned by the hon. Member for South Ayrshire (Mr. Emrys Hughes).
It is an absolute mystery to me why this matter has created such an enormous fuss. I think that we should not wait for the inquiry which my right hon. Friend has asked for, valuable though that would be; we should take a step to whittle down the privileges which this House has by voting against this Motion on the spot.

Mr. Eric Ogden: Those who have spoken so far have been here much longer than I have. Equally, those who sent me to this place last October, believe, as I did, that I was sent here to speak the truth, as I saw it, and shame the devil. On this question of privilege, the devil seems to be winning. Those who stand on their privileges and dignity have little else on which to stand. I support what has been said by my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot).

4.7 p.m.

Mr. R. J. Maxwell-Hyslop: We heard from the Chancellor before he

withdrew what he did not mean, but we have yet to hear from him what he did mean. It would seem that unless this question does go to the Committee of Privileges we will have no opportunity of hearing and discussing, if necessary, what he did mean. If, when he made that speech, he meant nothing a all, it is right that the matter should drop, but if, instead of making a speech that meant nothing at all—with the intention that it should mean nothing at all—he meant to imply a criticism of some members of the Opposition, he should have the opportunity of making clear in what way it is that he believes the Opposition to have conducted themselves wrongly.
It cannot be that the Chancellor objects to individual Members representing outside bodies, since it will be within the recollection of many hon. Members that the Chancellor himself, from the Front Bench, spoke on behalf of an outside body. Incidentally, he spoke without even telling the House whether he had a financial interest in speaking for this outside body. It cannot be this of which he disapproves. Therefore, it is absolutely right, for the good name of this House, that this case should go to the Committee of Privileges, so that we may know what it was that the Chancellor meant to say when he said it.

Mr. E. Shinwell: rose in his place and claimed to move, That the Question be now put.

Mr. Speaker: I cannot accept the Motion.

Mr. Shinwell: It is about time, anyway.

4.10 p.m.

Mr. J. J. Mendelson: I rise to make an additional appeal to my right hon. Friend the Leader of the House and to make no comment on the issue itself. As is generally accepted, the Leader of the House acts on these occasions for all Members of the House of Commons and not as a member of the Government. It is on that basis that I should like to support the appeal made by my hon. Friend the Member for Nelson and Colne (Mr. Sydney Silverman). When, acting for all Members as Leader of the House, my right hon. Friend moves a Motion and then finds that there is a very large body of opinion in the House—not confined to any one side of the House—


which does not wish the matter to be proceeded with in that way, he is perfectly entitled to reconsider his opinion. This has nothing whatever to do with the fact that the case concerns a member of the Treasury Bench, as was suggested by one hon. Member. This has to do with a series of applications which have been discussed in recent weeks.

If this matter is referred to the Committee of Privileges, there will be a sense of injustice among many hon. Members. It is on those grounds that I repeat the appeal to the Leader of the House to withdraw the Motion.

Question put:—

The House divided: Ayes 254, Noes 248.

Division No. 232.]
AYES
[4.11 p.m.


Agnew, Commander Sir Peter
Drayson, G. B.
Kershaw, Anthony


Alison, Michael (Barkston Ash)
du Cann, Rt. Hn. Edward
Kilfedder, James A.


Allan, Robert (Paddington, S.)
Eden, Sir John
Kimball, Marcus


Allason, James (Hemel Hempstead)
Elliot, Capt. Walter (Carshalton)
King, Evelyn (Dorset, S.)


Anstruther-Gray, Rt. Hn. Sir W.
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Kirk, Peter


Astor, John
Emery, Peter
Kitson, Timothy


Awdry, Daniel
Eyre, Reginald
Lagden, Godfrey


Baker, W. H. K.
Farr, John
Lambton, Viscount


Balniel, Lord
Fell, Anthony
Lancaster, Col. C. G.


Barber, Rt. Hn. Anthony
Fisher, Nigel
Langford-Holt, Sir John


Barlow, Sir John
Fletcher-Cooke, Charles (Darwen)
Legge-Bourke, Sir Harry


Batsford, Brian
Fletcher-Cooke, Sir John (S'pton)
Litchfield, Capt. John


Bell, Ronald
Foot, Sir Dingle (Ipswich)
Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)


Bennett, Sir Frederic (Torquay)
Foster, Sir John
Lloyd, Rt. Hn. Selwyn (Wirral)


Berkeley, Humphry
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Longden, Gilbert


Berry, Hn. Anthony
Fraser, Ian (Plymouth, Sutton)
Lucas, Sir Jocelyn


Biggs-Davison, John
Gammans, Lady
McAdden, Sir Stephen


Black, Sir Cyril
Gibson-Watt, David
MacArthur, lan


Blaker, Peter
Giles, Rear-Admiral Morgan
McLaren, Martin


Bossom, Hn. Clive
Gilmour, Ian (Norfolk, Central)
Maclean, Sir Fitzroy


Bowden, Rt. Hn. H. W. (Leics S. W.)
Gilmour, Sir John (East Fife)
McMaster, Stanley


Box, Donald
Glover, Sir Douglas
McNair-Wilson, Patrick


Boyd-Carpenter, Rt. Hn. J.
Glyn, Sir Richard
Maginnis, John E.


Braine, Bernard
Godber, Rt. Hn. J. B.
Maitland, Sir John


Brewis, John
Goodhart, Philip
Marten, Neil


Brinton, Sir Tatton
Goodhew, Victor
Mathew, Robert



Gower, Raymond
Maude, Angus


Bromley-Davenport, Lt.-Col. Sir Walter
Grant, Anthony
Maudling, Rt. Hn. Reginald


Brooke, Rt. Hn. Henry
Grant-Ferris, R.
Mawby, Ray


Brown, Sir Edward (Bath)
Gresham Cooke, R.
Maxwell-Hyslop, R. J.


Bruce-Gardyne, J.
Griffiths, Eldon (Bury St. Edmunds)
Maydon, Lt.-Cmdr. S. L. C.


Bryan, Paul
Griffiths, Peter (Smethwick)
Meyer, Sir Anthony


Buchanan-Smith, Alick
Gurden, Harold
Mills, Peter (Torrington)


Bullus, Sir Eric
Hall, John (Wycombe)
Mills, Stratton (Belfast, N.)


Burden, F. A.
Hall-Davis, A. G. F.
Miscampbell, Norman


Butcher, Sir Herbert
Hamilton, Marquess of (Fermanagh)
Mitchell, David


Buxton, Ronald
Hamilton, M. (Salisbury)
Monro, Hector


Campbell, Gordon
Harris, Frederic (Croydon, N. W.)
More, Jasper


Carr, Rt. Hn. Robert
Harris, Reader (Heston)
Morrison, Charles (Devizes)


Cary, Sir Robert
Harrison, Brian (Maldon)
Mott-Radcliffe, Sir Charles


Channon, H. P. G.
Harvey, Sir Arthur Vere (Macclesf'd)
Munro-Lucas-Tooth, Sir Hugh


Chataway, Christopher
Harvey, John (Walthamstow, E.)
Murton, Oscar


Chichester-Clark, R.
Harvie Anderson, Miss
Neave, Airey


Clark, Henry (Antrim, N.)
Hastings, Stephen
Nicholson, Sir Godfrey


Clark, William (Nottingham, S.)
Hawkins, Paul
Noble, Rt. Hn. Michael


Clarke, Brig. Terence (Portsmth, W.)
Heath, Rt. Hn. Edward
Nugent, Rt. Hn. Sir Richard


Cole, Norman
Higgins, Terence L.
Onslow, Cranley


Cooke, Robert
Hill, J. E. B. (S. Norfolk)
Orr, Capt. L. P. S.


Cooper, A. E.
Hirst, Geoffrey
Orr-Ewing, Sir Ian


Cooper-Key, Sir Neill
Hobson, Rt. Hn. Sir John



Corbet, Mrs. Freda
Hopkins, Alan
Osborn, John (Hallam)


Cordle, John
Hordern, Peter
Osborne, Sir Cyril (Louth)


Corfield, F. V.
Hornby, Richard
Page, John (Harrow, W.)


Costain, A. P.
Hornsby-Smith, Rt. Hn. Dame P.
Page, R. Graham (Crosby)


Courtney, Cdr. Anthony
Howard, Hn. G. R. (St. Ives)
Pearson, Sir Frank (Clitheroe)


Craddock, Sir Beresford (Spelthorne)
Hutchison, Michael Clark
Peel, John


Crawley, Aidan
Iremonger, T. L.
Percival, Ian


Crosthwaite-Eyre, Col. Sir Oliver
Irvine, Bryant Godman (Rye)
Peyton, John


Cunningham, Sir Knox
Jenkin, Patrick (Woodford)
Pickthorn, Rt. Hn. Sir Kenneth


Currie, G. B. H.
Jennings, J. C.
Pike, Miss Mervyn


Dalkeith, Earl of
Johnson, Carol (Lewisham, S.)
Pitt, Dame Edith


Dance, James
Johnson Smith, G. (East Grinstead)
Pounder, Rafton


Davies, Dr. Wyndham (Perry Barr)
Jones, Arthur (Northants, S.)
Powell, Rt. Hn. J. Enoch


d'Avigdor-Goldsmid, Sir Henry
Jopling, Michael
Price, David (Eastleigh)


Dean, Paul
Joseph, Rt. Hn. Sir Keith
Prior, J. M. L.


Dodds-Parker, Douglas
Kaberry, Sir Donald
Pym, Francis


Doughty, Charles
Kerby, Capt. Henry
Ramsden, Rt. Hn. James


Douglas-Home, Rt. Hn. Sir Alec
Kerr, Sir Hamilton (Cambridge)
Rawlinson, Rt. Hn. Sir Peter




Redmayne, Rt. Hn. Sir Martin
Stainton, Keith
Wall, Patrick


Rees-Davies, W. R.
Stanley, Hn. Richard
Walters, Dennis


Renton, Rt. Hn. Sir David
Studholme, Sir Henry
Ward, Dame Irene


Ridley, Hn. Nicholas
Talbot, John E.
Weatherill, Bernard


Ridsdale, Julian
Taylor, Sir Charles (Eastbourne)
Webster, David


Roberts, Sir Peter (Heeley)
Taylor, Edward M. (G'gow, Cathcart)
Wells, John (Maidstone)


Rodgers, Sir John (Sevenoaks)
Teeling, Sir William
Whitelaw, William


Roots, William
Thatcher, Mrs. Margaret
Williams, Sir Rolf Dudley (Exeter)


St. John-Stevas, Norman
Thomas, Sir Leslie (Canterbury)
Wills, Sir Gerald (Bridgwater)


Sandys, Rt. Hn. D.
Thompson, Sir Richard (Croydon, S.)
Wilson, Geoffrey (Truro)


Scott-Hopkins, James
Tiley, Arthur (Bradford, W.)
Wise, A. R.


Sharples, Richard
Tilney, John (Wavertree)
Wolrige-Gordon, Patrick


Shepherd, William
Tweedsmuir, Lady
Woodhouse, Hon. Christopher


Sinclair, Sir George
van Straubenzee, W. R.
Wylie, N. R.


Smith, Dudley (Br'ntf'd &amp; Chiswick)
Vaughan-Morgan, Rt. Hn. Sir John
Yates, William (The Wrekin)


Smyth, Rt. Hn. Brig. Sir John
Vickers, Dame Joan
Younger, Hn. George


Spearman, Sir Alexander
Walder, David (High Peak)



Speir, Sir Rupert
Walker, Peter (Worcester)
TELLERS FOR THE AYES:




Mrs. Slater and Mr. Lawson.




NOES


Abse, Leo
Foley, Maurice
McBride, Neil


Albu, Austen
Ford, Ben
McCann, J.


Allaun, Frank (Salford, E.)
Freeson, Reginald
MacColl, James


Alldritt, Walter
Galpern, Sir Myer
MacDermot, Niall


Atkinson, Norman
Garrett, W. E.
McGuire, Michael


Bacon, Miss Alice
George, Lady Megan Lloyd
McInnes, James


Bagier, Gordon A. T.
Ginsburg, David
Mackenzie, Alasdair (Ross &amp; Crom'ty)


Barnett, Joel
Gourlay, Harry
Mackenzie, Gregor (Rutherglen)


Baxter, William
Gregory, Arnold
Mackie, George Y. (C'ness &amp; S'land)


Bence, Cyril
Griffiths, David (Rother Valley)
McLeavy, Frank


Benn, Rt. Hn. Anthony Wedgwood
Griffiths, Rt. Hn. James (Llanelly)
Mahon, Peter (Preston, S.)


Bennett, J. (Glasgow, Bridgeton)
Hale, Leslie
Mahon, Simon (Bootle)


Binns, John
Hamilton, James (Bothwell)
Mallalieu, J. P. W. (Huddersfield, E.)


Bishop, E. S.
Hamilton, William (West Fife)
Manuel, Archie


Blenkinsop, Arthur
Hamling, William (Woolwich, W.)
Mapp, Charles


Boston, T. G.
Hannan, William
Marsh, Richard


Bottomley, Rt. Hn. Arthur
Harper, Joseph
Mason, Roy


Bowen, Roderic (Cardigan)
Harrison, Walter (Wakefield)
Maxwell, Robert


Braddock, Mrs. E. M.
Hart, Mrs. Judith
Mayhew, Christopher


Bradley, Tom
Hazell, Bert
Mellish, Robert


Bray, Dr. Jeremy
Heffer, Eric S.
Mendelson, J. J.


Brown, Hugh D. (Glasgow, Provan)
Henderson, Rt. Hn. Arthur
Mikardo, Ian


Buchan, Norman (Renfrewshire, W.)
Herbison, Rt. Hn. Margaret
Millan, Bruce


Buchanan, Richard
Hobden, Dennis (Brighton, K'town)
Miller, Dr. M. S.


Butler, Herbert (Hackney, C.)
Holman, Percy
Milne, Edward (Blyth)


Butler, Mrs. Joyce (Wood Green)
Horner, John
Molloy, William


Carmichael, Neil
Houghton, Rt. Hn. Douglas
Monslow, Walter


Carter-Jones, Lewis
Howarth, Harry (Wellingborough)
Morris, Charles (Openshaw)


Castle, Rt. Hn. Barbara
Howarth, Robert L. (Bolton, E.)
Morris, John (Aberavon)


Chapman, Donald
Howell, Denis (Small Heath)
Murray, Albert


Coleman, Donald
Howie, W.
Neal, Harold


Conlan, Bernard
Hoy, James
Newens, Stan


Craddock, George (Bradford, S.)
Hughes, Cledwyn (Anglesey)
Noel-Baker, Francis (Swindon)


Crossman, Rt. Hn. R. H. S.
Hughes, Emrys (S. Ayrshire)
Noel-Baker, Rt. Hn. Philip (Derby, S.)


Cullen, Mrs. Alice
Hughes, Hector (Aberdeen, N.)
Norwood, Christopher


Dalyell, Tam
Hunter, Adam (Dunfermline)
Oakes, Gordon


Darling, George
Hunter, A. E. (Feltham)
Ogden, Eric


Davies, Ifor (Gower)
Hynd, H. (Accrington)
O'Malley, Brian


Davies, S. O. (Merthyr)
Jackson, Colin
Oram, Albert E. (E. Ham, S.)


Delargy, Hugh
Janner, Sir Barnett
Orbach, Maurice


Dell, Edmund
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Orme, Stanley


Dempsey, James
Jenkins, Hugh (Putney)
Oswald, Thomas


Diamond, Rt. Hn. John
Jenkins, Rt. Hn. Roy (Stechford)
Owen, Will


Dodds, Norman
Johnson, James (K'ston-on-Hull, W.)
Padley, Walter


Doig, Peter
Johnston, Russell (Inverness)
Page, Derek (King's Lynn)


Driberg, Tom
Jones, Dan (Burnley)
Paget, R. T.


Duffy, Dr. A. E. P.
Jones, J. Idwal (Wrexham)
Palmer, Arthur


Dunn, James A.
Jones, T. W. (Merioneth)
Pannell, Rt. Hn. Charles


Dunnett, Jack
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Pargiter, G. A.


Edelman, Maurice
Kerr, Dr. David (W'worth, Central)
Park, Trevor (Derbyshire, S. E.)


Edwards, Robert (Bilston)
Leadbitter, Ted
Parker, John


English, Michael
Ledger, Ron
Parkin, B. T.


Ennals, David
Lee, Miss Jennie (Cannock)
Pavitt, Laurence


Ensor, David
Lever, Harold (Cheetham)
Pearson, Arthur (Pontypridd)


Evans, Albert (Islington, S. W.)
Lever, L. M. (Ardwick)
Pentland, Norman


Evans, Ioan (Birmingham, Yardley)
Lewis, Arthur (West Ham, N.)
Perry, Ernest G.


Fernyhough, E.
Lewis, Ron (Carlisle)
Popplewell, Ernest


Finch, Harold (Bedwellty)
Lipton, Marcus
Prentice, R. E.


Fitch, Alan (Wigan)
Lomas, Kenneth
Price, J. T. (Westhoughton)


Fletcher, Ted (Darlington)
Loughlin, Charles
Probert, Arthur


Fletcher, Raymond (Ilkeston)
Lubbock, Eric
Pursey, Cmdr. Harry


Floud, Bernard
Mabon, Dr. J. Dickson
Randall, Harry







Rankin, John
Steel, David (Roxburgh)
Watkins, Tudor


Redhead, Edward
Steele, Thomas (Dunbartonshire, W.)
Weitzman, David


Rees, Merlyn
Stonehouse, John
Wells, William (Walsall, N.)


Rhodes, Geoffrey
Stones, William
White, Mrs, Eirene


Roberts, Goronwy (Caernarvon)
Strauss, Rt. Hn. G. R. (Vauxhall)
Whitlock, William


Robertson, John (Paisley)
Summerskill, Hn. Dr. Shirley
Wilkins, W. A.


Rodgers, William (Stockton)
Swain, Thomas
Willey, Rt. Hn. Frederick


Rogers, George (Kensington, N.)
Swingler, Stephen
Williams, Alan (Swansea, W.)


Rose, Paul B.
Symonds, J. B.
Williams, Clifford (Abertillery)


Ross, Rt. Hn. William
Taylor, Bernard (Mansfield)
Williams, Mrs. Shirley (Hitchin)


Rowland, Christopher
Thomas, George (Cardiff, W.)
Williams, W. T. (Warrington)


Sheldon, Robert
Thomas, Iorwerth (Rhonnda, W.)
Willis, George (Edinburgh, E.)


Shinwell, Rt. Hn. E.
Thomson, George (Dundee, E.)
Wilson, William (Coventry, S.)


Shore, Peter (Stepney)
Thornton, Ernest
Winterbottom, R. E.


Short, Mrs. Renée (W'hampton, N. E.)
Tinn, James
Woodburn, Rt. Hn. A.


Silverman, Julius (Aston)
Tomney, Frank
Woof, Robert


Silverman, Sydney (Nelson)
Tuck, Raphael
Wyatt, Woodrow


Skeffington, Arthur
Urwin, T. W.
Yates, Victor (Ladywood)


Slater, Joseph (Sedgefield)
Varley, Eric G.



Small, William
Walden, Brian (All Saints)
TELLERS FOR THE NOES:


Snow, Julian
Walker, Harold (Doncaster)
Mr. Hooson and Mr. M. Foot.


Soskice, Rt. Hn. Sir Frank
Wallace, George

Mr. Shinwell: On a point of order. With great respect, Mr. Speaker, may I have your permission to put a question to my right hon. Friend the Leader of the House? [Interruption.] I hope that hon. Gentlemen opposite will be quiet. As I was saying, Mr. Speaker, I want your permission to put a question to my right. hon. Friend. [Interruption.]

Mr. Speaker: I want to know what it is before I can rule whether or not it is in order.

Mr. Shinwell: Thank you, Mr. Speaker. I wish to ask my right hon. Friend whether, in view of the narrow majority in the Division which has just been taken, it would be wise to remit this question to the Committee of Privileges.

Mr. Speaker: What the right hon. Gentleman has said will have been heard. That is the limit to which I can go.

Sir Rolf Dudley-Williams: Further to that point of order. In view of the fact that the Leader of the House has been completely let down by his party—[HON. MEMBERS: "No."]

Mr. Speaker: If the hon. Gentleman has a point of order he should say what it is and not other things.

Sir Rolf Dudley-Williams: Since the Leader of the House has been completely let down by his side, would I be in order in inquiring whether he intends to give up his office?

Mr. Speaker: No. I do not follow the exercise of the hon. Gentleman's intelligence—[HON. MEMBERS: "Hear, hear."]—in thinking that that raises a point of order. It is highly desirable that hon. Members should not raise bogus points of order.

Mr. Ronald Bell: Further to the point of order. It seemed that in answer to the point of order raised by the right hon. Member for Easington (Mr. Shinwell) you said that his comments had no doubt been heard or observed. Am I not right in thinking that the Resolution of the House now completely governs the matter and that the Leader of the House has no discretion in the matter at all?

Mr. Speaker: I do not think that any point of order arises about it. That matter is concluded.

Orders of the Day — FINANCE (No. 2) BILL

As amended, further considered.

New Clause No. 1.—(VEHICLES USED ON PRIVATE LAND.)

Section 6(6) of the Vehicles (Excise) Act 1962 shall be repealed and the following subsection substituted therefor—

(6) If an applicant for a licence under this Act in respect of a mechanically propelled vehicle satisfies the county council that the vehicle is intended to be used on public roads—

(a) only in passing from land in his occupation to other land in his occupation; and
(b) the radius of travel will never exceed six miles from the place where the vehicle is normally kept; or
(c) for distances not exceeding in the aggregate six miles in any calendar week;

then, if authorised so to do by the Minister with the consent of the Treasury, the council may exempt the vehicle from the duty chargeable under this Act in respect of the use of the vehicle on roads.—[Mr. Turton.]

Brought up, and read the First time.

4.28 p.m.

Mr. R. H. Turton: I beg to move, That the Clause be read a Second time.
On 20th May, when we were discussing the new charges on vehicle excise licences, I raised the matter of the very high increase, of 700 per cent. since 1960, in the licence charges for agricultural tractors. In my speech I pointed out to the Government that the present exemption limit for agricultural vehicles worked much more harshly on those vehicles than it did on other vehicles because of the seasonal nature of agricultural work. Having pointed that out to the Committee on that occasion, the Financial Secretary to the Treasury invited me to table, in the form of an Amendment, the suggestion I was making for granting an exemption on grounds of radius of travel rather than on grounds of the maximum mileage per week, and that is the object of the Clause. The provision for exemptions is that before one can apply for an exemption from licensing a motor vehicle, one must prove that one uses that vehicle only in going from one part of one's land to another part and, secondly, that in any one week

one does not exceed six miles on the road.
Where the vehicle is used for industrial purposes, crossing a road from one part of the factory to another, this exemption in Section 6(6) of the Vehicles (Excise) Act, 1962, works reasonably fairly, but when it deals with agricultural vehicles it is working unfairly. Although the vehicle frequently is not used on the road at all for many months of the year, during the hay and corn harvesting operations it is used more frequently on the roads than is permitted by the maximum of six miles in one week.
May I give an illustration? During the harvesting period the combines frequently have to travel down the road from the farmhouse to a field on the opposite side of the road. Although their total mileage in any one year is very small, the exemption limit of six miles in any one week is exceeded by those combine harvesters. Secondly, in many areas of the country there is great severance of agricultural land because of the creation of new roads or the improvement of old roads. As a result of this, farmers who have suffered severance frequently find that at harvest times or at ploughing times they have to use tractors and other vehicles on the roads for more than six miles in any one week.
My third illustration applies particularly to the upland and moorland areas. In times of hard weather, upland farmers have to take fodder out to cattle and sheep on the hills. During that period of hard weather they have to cover more than six miles in any one week.
The test is to see how these provisions operate for agricultural vehicles. At present, fewer than one-tenth of the total number of agricultural tractors on farms are eligible for the farmer to apply for exemption under the six-mile limit. But it is clear that a much higher proportion of agricultural tractors are, in fact, used only on the farms and to no appreciable extent on the roads.
I mentioned this point in Committee. The Financial Secretary to the Treasury said that although there might be something in it, he thought that it would be hard to supervise or to police. May I suggest to him that the radius limit is far easier to police than the limit


of a maximum of six miles in any one week. Those who were trying to police my proposal would know at once whether a vehicle was more than six miles away from its base. If it were more than six miles from the base, then an offence would have been committed and a vehicle licence would be required. At present, we must trust to the honesty of the vehicle owner to state whether he exceeds a maximum of six miles on the road in any one week.
That would be difficult to supervise, one would have to take the number of journeys for each week, count them up and see whether the six-mile limit had been exceeded. In view of the very heavy increase in the vehicle excise licence, it is important that we should have a cast-iron system of exemption. We should not have a system under which people try to exempt themselves from licensing and frequently go the wrong side of the law.
That is why I submit to the Government that this system of a radius limit, which I put in the form of an alternative to the present provisions, is the right way of doing it. I hope that the Government will consider it sympathetically, because it will help, in particular, the small farmers far more than the larger farmers, and especially the small farmers on marginal land and in upland areas. Those farmers are not having an easy time this year. If the Government accepted the Clause it would be of great benefit to them.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): It was, I think, Swift who said that he was the true benefactor of mankind who made two blades of grass grow where only one grew before. I have discovered a way to make two suggestions for concession grow where only one suggestion grew before—and that is to grant the first. The right hon. Member for Thirsk and Malton (Mr. Turton) said that I had invited him to put down a new Clause in these terms. I do not recall doing that, but I recall undertaking to look very carefully into the possibility of granting such concessions as we felt able to grant in the form of a radius exemption.
As hon. Members know, on the Notice Paper there are a number of concessions in the name of my right hon. Friend which would affect farmers' vehicles. We

looked carefully into the radius question, as I undertook to do, but we did not find a workable solution in that direction. After our debate in Committee I received a delegation from the National Farmers' Union. I found it a particularly helpful meeting, and I was considerably influenced by what members of the delegation said in the Amendments which have been drafted. We discussed this question of the radius. I want to be careful in what I say so as not to attribute anything to them which they would not accept; but I think that they understood and recognised the difficulties of radius exemption, I certainly formed the impression that this was not one which they were putting in the front of their priorities to impress on the Government.

Mr. Turton: I think that the hon. and learned Member has misunderstood the position of the National Farmers' Union. I have a letter from the union about this, and it does not convey the same impression.

Mr. MacDermot: I agree that it is a matter very much of impression. I was trying to be careful, and I was not suggesting that the union would not like the radius concession to be made. Of course it would.
The reasons why we must advise the House to reject the new Clause are, first, a matter to which the right hon. Gentleman alluded—the severe policing difficulties; secondly, that it would lead to a significant loss of revenue; and, thirdly, that it would lead to pressure for further extensions, in particular by abolishing the requirement that the vehicle should be passing from one piece of land in the owner's occupation to another.
I shall seek to explain why. The case for the extension from the basis of the present exemption—six miles in any week—is intended to apply only to vehicles which are not in any normal sense used on public roads. It is the case of the industrial vehicle that has to cross the road when factory premises are sited on both sides of the road. It is intended to cover the case where farm buildings straddle a road—and the vehicle may not need necessarily to cross directly over the road but may go at an angle and thereby cover a small stretch of road.
This provision is an easy one to police, not only because of the honesty of the


taxpayer, but because, obviously, this is something well within the knowledge of the local constable. He will know whether or not the particular stretch of road on which he sees a tractor is a short stretch of road leading from one part of the farm to another.
The Clause, if accepted, would widen this concession to any kind of vehicle. Although the radius may be limited, it could operate in total over quite considerable margins over a year. To give an example, imagine a market gardener whose market garden is located a short distance outside the town and within the six-mile radius. Imagine that he has a shop in the town where he sells his produce. That is not a fanciful or unusual circumstance. He may have a van for transporting his market produce to the shop. There is no reason why that vehicle should be exempt from vehicle licence duty.
If this exemption were granted it could also cover a person who had two or more houses or business premises within a six-mile distance of each other. He could use a vehicle regularly in travelling between them. It is obvious from these examples that the difficulty of policing would be of a quite different order from the difficulty in the present six miles a week concession. If we included the use of such a vehicle in town, problems of quite a different order would arise.
By the wording of the Clause in a sense the problem of policing would be overcome because the Clause is loosely worded and has the qualifying feature that the applicant shall satisfy
the county council that the vehicle is intended to be used on public roads—
I suppose that having satisfied the council of the intention, no offence would be committed thereafter, whatever the use of the vehicle was. Perhaps I have misunderstood that, but whether that is so or not, the policing difficulties would be very substantial.

Mr. Turton: The words used here are exactly the same as those used in Section 6(6) of the Vehicles Excise Act, 1962. If they are wrong here, they are wrong there.

4.45 p.m.

Mr. MacDermot: It may be that some other provision covers a use outside the

intention. Be that as it may, the policing difficulties would obviously be real. Not only that, but this would lead to a host of complaints that it was unfair. In the case of the market gardener which I have instanced, his neighbour might also be a market gardener and not have a shop in the town. He might bring his goods to sell in the ordinary market in the town. He would say that it was most unjust that the other man, because he had a shop, should be exempt whereas he, bringing his goods to the market, was not exempt although he was using his vehicle in exactly the same way.
The present exemptions in favour of agricultural vehicles are considerable. They go very far and are very useful. They are, incidentally, also costly to the Exchequer. There is complete exemption for six miles' travel in any one week; and, let it be remembered, this is coupled with the right which unlicensed agricultural vehicles have to use rebated oil with a duty of only 2d. a gallon. There is the very low rate of £3 15s. a year for tractors and other agricultural machines. The revenue involved here is about £1½ million a year. We are advised that virtually the whole of that would be lost if the new Clause were accepted: In addition, tractors so licensed can be used for hauling farm produce within a 15-mile radius without any extra trailer duty, and similarly for hauling threshing plants or other farm implements or fuel or water for agricultural purposes. These are additional to the lower rates of duty for farmers' goods vehicles.
Under the Government Amendments on the Notice Paper, into which it would be out of order to go in detail, farmers are now to benefit still further by a still more preferential rate. We have lowered the rate of increase for farmers' goods vehicles, including dual purpose vehicles and including a concession in the rate for trailer duty. The total cost of these new concessions for farmers alone will be about £300,000 a year.
I suggest that we have been very generous in our treatment of farmers and that for the reasons I have given it would be right to reject this new Clause.

Mr. James Scott-Hopkins: I am sorry that, once again, the Financial Secretary has given a very disappointing reply to the powerful case


made by my right hon. Friend the Member for Thirsk and Malton (Mr. Turton). It seems that the Financial Secretary accepts the logic of the case that there is a necessity to do something for farmers. We have been all over this argument before and discussed how they are controlled and that there is a necessity for special concessions for farmers.
As my right hon. Friend pointed out, actual wording of this Clause follows exactly that of the 1962 consolidation Act. The only difference here is that the Financial Secretary based his case on the difficulty of policing the provision. The existing provision of the six-mile check is extremely difficult to police. The Financial Secretary said that the local policeman would know whether the vehicle was more than six miles from the farm. Of course he would, but the vehicle at present would have to go about three-quarters of a mile four times a week in order to be beyond the exemption. This frequently happens, not because farmers are dishonest but because often they have to go more than three-quarters of a mile from one part of the farm to another when farms have been fragmented as they have been in the South-West and elsewhere. The existing regulations are already difficult to police.
The other point made by the Financial Secretary was about unfairness and the difficulty about a vehicle going into a town, but that can happen now. If the town is within the six-mile radius the vehicle can go in and the policeman can keep a check on it. Farmers are honest and do not willingly cheat. I think the Financial Secretary is making a mountain out of a molehill. By accepting this addition of a radius revision he would be reasonable and fair. He said that it would cost £1½ million. After the troubles farmers have suffered under this Government and the difficulties caused by the Price Review, this would be a small compensation for hardships which farmers have suffered and are suffering.
The Chief Secretary to the Treasury is shaking his head but, what I am saying is true. All the logic suggests that the policing of such a provision would be easier and it would be more fair between one operator and another, between one farmer and another and between one horticulturist and another. I hope that

what has been said by my right hon. Friend will have persuaded hon. Members. Unless the Government—having been given time for second thoughts—give a more hopeful answer, I hope that my hon. Friends will carry this matter into the Division Lobby.

Mr. Timothy Kitson: I would like to support my right hon. Friend the Member for Thirsk and Malton (Mr. Turton). When we hear the Financial Secretary talking about pulling threshing machines about this shows how far out of date this legislation is. Threshing machines nowadays are in museums. If a farm applies for the exemption there is the expense of sending a man out to measure up the journeys that the farmer intends to make with his tractor. Then the farmer is sent a form which tells him from which fields he can move and on how many occasions during the week. He has then to give this to the man who drives the tractor, and by the end of the day it is very difficult to know what one is allowed to do with one's tractor during the week and what one is not allowed to do.
The Financial Secretary is being unreasonable about this matter. This is a very reasonable and sensible Clause. I do not believe that the majority of village policemen know how many times a farmer has run his tractor up and down the road each week. There is also the question of emergencies to be considered. Very often a man may have made his three journeys between fields and then finds that there is a dead cow in one of them. What does he do? Wait till the next week to remove it? I suggest that the Financial Secretary ought to accept this New Clause. It is extremely reasonable, and by the noises he made during the Committee stage of the Bill we had hoped he would do just that.

Mr. John Farr: I would like to reinforce what my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) has said. The law at present is quite unenforceable and to have a law which is unenforceable can only bring it into contempt. In that part of the country which I represent, southern Leicestershire, and the borders of Northamptonshire, there are very few rural policemen in the northern belt of Northamptonshire. One rural


"bobby" on his pedal cycle has between 50 and 75 square miles to police. It is obviously quite impossible for any policemen to tell whether or not a farm vehicle has done more than its six miles in a week.
The Clause is a sensible one, which should be passed, and I would urge the Financial Secretary to reconsider this matter.

Mr. Roderic Bowen: It seems most stupid if the local police constable is to have to spend a substantial time in trying to see whether the law is being observed in this matter. It also means that the farmers would be placed in the position of having to calculate each week whether or not they were on the right side of the law. They would not actually know whether or not they were on the correct side of the law, and if they developed a casual attitude towards this

it would be a very undesirable state of affairs.

We have heard a great deal, in agricultural debates, about amalgamation and readjustment of the land held by farmers. The trend, at least in my part of Wales, is for a farmer who has a small farm to acquire land in the immediate vicinity, perhaps on the other side of the road, to farm in conjunction with that unit and make better use of his agricultural machinery. It may be that the correct answer is somewhere between what is proposed in the new Clause and what the Financial Secretary has in mind. Clearly what is proposed in the Clause would be a more satisfactory position than what the Financial Secretary envisaged.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 269, Noes 273.

Division No. 233.]
AYES
[4.55 p.m.


Agnew, Commander Sir Peter
Clarke, Brig. Terence (Portsmth, W.)
Grant, Anthony


Alison, Michael (Barkston Ash)
Cole, Norman
Grant-Ferris, R.


Allan, Robert (Paddington, S.)
Cooke, Robert
Gresham-Cooke, R.


Allason, James (Hemel Hempstead)
Cooper, A. E.
Griffiths, Eldon (Bury St. Edmunds)


Amery, Rt. Hn. Julian
Cooper-Key, Sir Neill
Griffiths, Peter (Smethwick)


Anstruther-Gray, Rt. Hn. Sir W.
Cordle, John
Grimond, Rt. Hn. J.


Astor, John
Corfield, F. V.
Gurden, Harold


Atkins, Humphrey
Costain, A. P.
Hall, John (Wycombe)


Awdry, Daniel
Courtney, Cdr. Anthony
Hall-Davis, A. G. F.


Baker, W. H. K.
Craddock, Sir Beresford (Spelthorne)
Hamilton, Marquess of (Fermanagh)


Balniel, Lord
Crawley, Aidan
Hamilton, M. (Salisbury)


Barber, Rt. Hn. Anthony
Crosthwaite-Eyre, Col. Sir Oliver
Harris, Frederic (Croydon, N. W.)


Barlow, Sir John
Cunningham, Sir Knox
Harris, Reader (Heston)


Batsford, Brian
Currie, G. B. H.
Harrison, Brian (Maldon)


Bell, Ronald
Dalkeith, Earl of
Harvey, Sir Arthur Vere (Macclesf'd)


Bennett, Sir Frederic (Torquay)
Dance, James
Harvey, John (Walthamstow, E.)


Berkeley, Humphry
Davies, Dr. Wyndham (Perry Barr)
Harvie Anderson, Miss


Berry, Hn. Anthony
d'Avigdor-Goldsmid, Sir Henry
Hastings, Stephen


Biggs-Davison, John
Dean, Paul
Hawkins, Paul


Birch, Rt. Hn. Nigel
Digby, Simon Wingfield
Hay, John


Black, Sir Cyril
Dodds-Parker, Douglas
Heath, Rt. Hn. Edward


Blaker, Peter
Doughty, Charles
Hendry, Forbes


Bossom, Hn. Clive
Douglas-Home, Rt. Hn. Sir Alec
Higgins, Terence L.


Bowen, Roderic (Cardigan)
Drayson, G. B.
Hill, J. E. B. (S. Norfolk)


Box, Donald
du Cann, Rt. Hn. Edward
Hirst, Geoffrey


Boyd-Carpenter, Rt. Hn. J.
Eden, Sir John
Hobson, Rt. Hn. Sir John


Braine, Bernard
Elliot, Capt. Walter (Carshalton)
Hooson, H. E.


Brewis, John
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Hopkins, Alan


Brinton, Sir Tatton
Emery, Peter
Hordern, Peter


Bromley-Davenport, Lt.-Col. Sir Walter
Eyre, Reginald
Hornby, Richard


Brooke, Rt. Hn. Henry
Farr, John
Hornsby-Smith, Rt. Hn. Dame P.


Brown, Sir Edward (Bath)
Fell, Anthony
Howard, Hn. G. R. (St. Ives)


Bruce-Gardyne, J.
Fisher, Nigel
Hutchison, Michael Clark


Bryan, Paul
Fletcher-Cooke, Charles (Darwen)
Iremonger, T. L.


Buchanan-Smith, Alick
Fletcher-Cooke, Sir John (S'pton)
Irvine, Bryant Godman (Rye)


Bullus, Sir Eric
Foster, Sir John
Jenkin, Patrick (Woodford)


Burden, F. A.
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Jennings, J. C.


Butcher, Sir Herbert
Gammans, Lady
Johnson Smith, G. (East Grinstead)


Buxton, Ronald
Gibson-Watt, David
Johnston, Russell (Inverness)


Campbell, Gordon
Giles, Rear-Admiral Morgan
Jones, Arthur (Northants, S.)


Carlisle, Mark
Gilmour, Ian (Norfolk, Central)
Jopling, Michael


Carr, Rt. Hn. Robert
Gilmour, Sir John (East Fife)
Joseph, Rt. Hn. Sir Keith


Cary, Sir Robert
Glover, Sir Douglas
Kaberry, Sir Donald


Channon, H. P. G.
Glyn, Sir Richard
Kerby, Capt, Henry


Chataway, Christopher
Godber, Rt. Hn. J. B.
Kerr, Sir Hamilton (Cambridge)


Chichester-Clark, R.
Goodhart, Philip
Kershaw, Anthony


Clark, Henry (Antrim, N.)
Goodhew, Victor
Kilfedder, James A.


Clark, William (Nottingham, S.)
Gower, Raymond
Kimball, Marcus




King, Evelyn (Dorset, S.)
Murton, Oscar
Speir, Sir Rupert


Kirk, Peter
Neave, Alrey
Stainton, Keith


Kitson, Timothy
Nicholson, Sir Godfrey
Stanley, Hn. Richard


Lagden, Godfrey
Noble, Rt. Hn. Michael
Steel, David (Roxburgh)


Lambton, Viscount
Nugent, Rt. Hn. Sir Richard
Studholme, Sir Henry


Lancaster, Col. C. G.
Onslow, Cranley
Talbot, John E.


Langford-Holt, Sir John
Orr, Capt. L. P. S.
Taylor, Sir Charles (Eastbourne)


Legge-Bourke, Sir Harry
Orr-Ewing, Sir Ian
Taylor, Edward M. (G'gow, Cathcart)


Lewis, Kenneth (Rutland)
Osborn, John (Hallam)
Teeling, Sir William


Litchfield, Capt. John
Osborne, Sir Cyril (Louth)
Temple, John M.


Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Page, John (Harrow, W.)
Thatcher, Mrs. Margaret


Lloyd, Rt. Hn. Selwyn (Wirral)
Page, R. Graham (Crosby)
Thomas, Sir Leslie (Canterbury)


Longden, Gilbert
Pearson, Sir Frank (Clitheroe)
Thompson, Sir Richard (Croydon, S.)


Loveys, Walter H.
Peel, John
Thorpe, Jeremy


Lubbock, Eric
Percival, Ian
Tiley, Arthur (Bradford, W.)


Lucas, Sir Jocelyn
Peyton, John
Tilney, John (Wavertree)


McAdden, Sir Stephen
Pickthorn, Rt. Hn. Sir Kenneth
Turton, Rt. Hn. R. H.


MacArthur, Ian
Pike, Miss Mervyn
Tweedsmuir, Lady


Mackenzie, Alasdair (Ross &amp; Crom'ty)
Pitt, Dame Edith
van Straubenzee, W. R.


Mackie, George Y. (C'ness &amp; S'land)
Pounder, Rafton
Vaughan-Morgan, Rt. Hn. Sir John


McLaren, Martin
Powell, Rt. Hn. J. Enoch
Vickers, Dame Joan


Maclean, Sir Fitzroy
Price, David (Eastleigh)
Walder, David (High Peak)


Macleod, Rt. Hn. Iain
Prior, J. M. L.
Walker, Peter (Worcester)


McMaster, Stanley
Pym, Francis
Wall, Patrick


McNair-Wilson, Patrick
Quennell, Miss J. M.
Walters, Dennis


Maginnis, John E.
Ramsden, Rt. Hn. James
Ward, Dame Irene


Maltland, Sir John
Rawlinson, Rt. Hn. Sir Peter
Weatherill, Bernard


Marten, Neil
Redmayne, Rt. Hn. Sir Martin
Webster, David


Mathew, Robert
Rees-Davies, W. R.
Wells, John (Maidstone)


Maude, Angus
Renton, Rt. Hn. Sir David
Whitelaw, William


Maudling, Rt. Hn. Reginald
Ridley, Hn. Nicholas
Williams, Sir Rolf Dudley (Exeter)


Mawby, Ray
Ridsdale, Julian
Wills, Sir Gerald (Bridgwater)


Maxwell-Hyslop, R. J.
Roberts, Sir Peter (Heeley)
Wilson, Geoffrey (Truro)


Maydon, Lt.-Cmdr. S. L. C.
Rodgers, Sir John (Sevenoaks)
Wise, A. R.


Meyer, Sir Anthony
Roots, William
Wolrige-Gordon, Patrick


Mills, Peter (Torrington)
St. John-Stevas, Norman
Woodhouse, Hon. Christopher


Mills, Stratton (Belfast, N.)
Sandys, Rt. Hn. D.
Woodnutt, Mark


Miscampbell, Norman
Scott-Hopkins, James
Yates, William (The Wrekin)


Mitchell, David
Sharples, Richard
Younger, Hn. George


Monro, Hector
Shepherd, William



Morrison, Charles (Devizes)
Sinclair, Sir George
TELLERS FOR THE AYES:


Mott-Radclyffe, Sir Charles
Smyth, Rt. Hn. Brig. Sir John
Mr. More and Mr. Dudley Smith.


Munro-Lucas-Tooth, Sir Hugh
Spearman, Sir Alexander





NOES


Abse, Leo
Crawshaw, Richard
Freeson, Reginald


Albu, Austen
Crosland, Anthony
Galpern, Sir Myer


Allaun, Frank (Salford, E.)
Crossman, Rt. Hn. R. H. S.
Garrett, W. E.


Alldritt, Walter
Cullen, Mrs. Alice
George, Lady Megan Lloyd


Atkinson, Norman
Dalyell, Tam
Ginsburg, David


Bacon, Miss Alice
Darling, George
Gregory, Arnold


Bagier, Gordon A. T.
Davies, S. O. (Merthyr)
Grey, Charles


Barnett, Joel
de Freitas, Sir Geoffrey
Griffiths, David (Rother Valley)


Baxter, William
Delargy, Hugh
Griffiths, Rt. Hn. James (Llanelly)


Bence, Cyril
Dell, Edmund
Griffiths, Will (M'chester, Exchange)


Benn, Rt. Hn. Anthony Wedgwood
Dempsey, James
Hale, Leslie


Bennett, J. (Glasgow, Bridgeton)
Diamond, Rt. Hn. John
Hamilton, James (Bothwell)


Binns, John
Dodds, Norman
Hamilton, William (West Fife)


Bishop, E. S.
Doig, Peter
Hamling, William (Woolwich, W.)


Blackburn, F.
Driberg, Tom
Hannan, William


Blenkinsop, Arthur
Duffy, Dr. A. E. P.
Harper, Joseph


Boardman, H.
Dunn, James A.
Harrison, Walter (Wakefield)


Boston, T. G.
Dunnett, Jack
Hart, Mrs. Judith


Bottomley, Rt. Hn. Arthur
Edelman, Maurice
Hazell, Bert


Bowden, Rt. Hn. H. W. (Leics S. W.)
Edwards, Robert (Bilston)
Heffer, Eric S.


Braddock, Mrs. E. M.
English, Michael
Henderson, Rt. Hn. Arthur


Bradley, Tom
Ennals, David
Herbison, Rt. Hn. Margaret


Bray, Dr. Jeremy
Ensor, David
Hobden, Dennis (Brighton, K'town.)


Broughton, Dr. A. D. D.
Evans, Albert (Islington, S. W.)
Holman, Percy


Brown, Hugh D. (Glasgow, Provan)
Evans, Ioan (Birmingham, Yardley)
Horner, John


Buchan, Norman (Renfrewshire, W.)
Fernyhough, E.
Houghton, Rt. Hn. Douglas


Buchanan, Richard
Finch, Harold (Bedwellty)
Howarth, Harry (Wellingborough)


Butler, Herbert (Hackney, C.)
Fitch, Alan (Wigan)
Howarth, Robert L. (Bolton, E.)


Butler, Mrs. Joyce (Wood Green)
Fletcher, Sir Eric (Islington, E.)
Howell, Denis (Small Health)


Callaghan, Rt. Hn. James
Fletcher, Ted (Darlington)
Howie, W.


Carmichael, Neil
Fletcher, Raymond (Ilkeston)
Hoy, James


Castle, Rt. Hn. Barbara
Floud, Bernard
Hughes, Cledwyn (Anglesey)


Chapman, Donald
Foley, Maurice
Hughes, Emrys (S. Ayrshire)


Coleman, Donald
Foot, Sir Dingle (Ipswich)
Hughes, Hector (Aberdeen, N.)


Conlan, Bernard
Foot, Michael (Ebbw Vale)
Hunter, Adam (Dunfermline)


Corbet, Mrs. Freda
Ford, Ben
Hunter, A. E. (Feltham)


Craddock, George (Bradford, S.)
Fraser, Rt. Hn. Tom (Hamilton)
Hynd, H. (Accrington)







Irving, Sydney (Dartford)
Morris, John (Aberavon)
Silverman, Sydney (Nelson)


Jackson, Colin
Mulley, Rt. Hn. Frederick (Sheffield Pk)
Skeffington, Arthur


Janner, Sir Barnett
Murray, Albert
Slater, Mrs. Harriet (Stoke, N.)


Jay, Rt. Hn. Douglas
Neal, Harold
Slater, Joseph (Sedgefield)


Jeger, George (Goole)
Newens, Stan
Small, William


Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Noel-Baker, Francis (Swindon)
Snow, Julian


Jenkins, Hugh (Putney)
Noel-Baker, Rt. Hn. Phillp (Derby, S.)
Soskice, Rt. Hn. Sir Frank


Jenkins, Rt. Hn. Roy (Stechford)
Norwood, Christopher
Steele, Thomas (Dunbartonshire, W.)


Johnson, Carol (Lewisham, S.)
Oakes, Gordon
Stewart, Rt. Hn. Michael


Johnson, James (K'ston-on-Hull, W.)
Ogden, Eric
Stonehouse, John


Jones, Dan (Burnley)
O'Malley, Brian
Stones, William


Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Oram, Albert E. (E. Ham, S.)
Strauss, Rt. Hn. G. R. (Vauxhall)


Jones, J. Idwal (Wrexham)
Orbach, Maurice
Stross, Sir Barnett (Stoke-on-Trent, C.)


Jones, T. W. (Merioneth)
Orme, Stanley
Summerskill, Hn. Dr. Shirley


Kelley, Richard
Oswald, Thomas
Swain, Thomas


Kenyon, Clifford
Owen, Will
Swingler, Stephen


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Padley, Walter
Symonds, J. B.


Kerr, Dr. David (W'worth, Central)
Page, Derek (King's Lynn)
Taverne, Dick


Lawson, George
Paget, R. T.
Taylor, Bernard (Mansfield)


Leadbitter, Ted
Palmer, Arthur
Thomas, George (Cardiff, W.)


Ledger, Ron
Pannell, Rt. Hn. Charles
Thomas, Iorwerth (Rhondda, W.)


Lee, Miss Jennie (Cannock)
Pargiter, G. A.
Thomson, George (Dundee, E.)


Lever, Harold (Cheetham)
Park, Trevor (Derbyshire, S. E.)
Thornton, Ernest


Lever, L. M. (Ardwick)
Parker, John
Tinn, James


Lewis, Arthur (West Ham, N.)
Parkin, B. T.
Tomney, Frank


Lewis, Ron (Carlisle)
Pavitt, Laurence
Tuck, Raphael


Lipton, Marcus
Pearson, Arthur (Pontypridd)
Urwin, T. W.


Loughlin, Charles
Pentland, Norman
Varley, Eric G.


Mabon, Dr. J. Dickson
Perry, Ernest G.
Walden, Brian (All Saints)


McBride, Neil
Popplewell, Ernest
Walker, Harold (Doncaster)


McCann, J.
Prentice, R. E.
Wallace, George


MacColl, James
Price, J. T. (Westhoughton)
Watkins, Tudor


MacDermot, Niall
Probert, Arthur
Weitzman, David


McGuire, Michael
Pursey, Cmdr. Harry
Wells, William (Walsall, N.)


McInnes, James
Randall, Harry
White, Mrs. Eirene


McKay, Mrs. Margaret
Rankin, John
Whitlock, William


Mackenzie, Gregor (Rutherglen)
Redhead, Edward
Wigg, Rt. Hn. George


McLeavy, Frank
Rees, Merlyn
Wilkins, W. A.


Mahon, Peter (Preston, S.)
Rhodes, Geoffrey
Willey, Rt. Hn. Frederick


Mahon, Simon (Bootle)
Roberts, Albert (Normanton)
Williams, Alan (Swansea, W.)


Mallalieu, J. P. W. (Huddersfield, E.)
Roberts, Goronwy (Caernarvon)
Williams, Albert (Abertillery)


Manuel, Archie
Robertson, John (Paisley)
Williams, Mrs. Shirley (Hitchin)


Mapp, Charles
Robinson, Rt. Hn. K. (St. Pancras, N.)
Williams, W. T. (Warrington)


Marsh, Richard
Rodgers, William (Stockton)
Willis, George (Edinburgh, E.)


Mason, Roy
Rogers, George (Kensington, N.)
Wilson, Rt. Hn. Harold (Huyton)


Maxwell, Robert
Rose, Paul B.
Wilson, William (Coventry, S.)


Mayhew, Christopher
Ross, Rt. Hn. William
Winterbottom, R. E.


Mellish, Robert
Rowland, Christopher
Woodburn, Rt. Hn. A.


Mendelson, J. J.
Sheldon, Robert
Woof, Robert


Millan, Bruce
Shinwell, Rt. Hn. E.
Wyatt, Woodrow


Miller, Dr. M. S.
Shore, Peter (Stepney)
Yates, Victor (Ladywood)


Milne, Edward (Blyth)
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)
Zilliacus, K.


Molloy, William
Short, Mrs. Renée (W'hampton, N. E.)



Monslow, Walter
Silkin, John (Deptford)
TELLERS FOR THE NOES:


Morris, Charles (Openshaw)
Silverman, Julius (Aston)
Mr. Ifor Davies and Mr. Gourlay.

New Clause.—(INVESTMENT CLUBS.)

(1) The trustee of an approved investment club shall submit to the Inspector a return of income and short-term capital gains received by him in respect of the funds of the club in his custody.—[Mr. Grant.]

Brought up, and read the First time.

Mr. Anthony Grant: I beg to move, That the Clause be read a Second time.
I should make it clear at the outset that I am on the Executive Committee of the Wider Share Ownership Council, which is an all-party organisation, from which I receive no remuneration whatsoever. I have endeavoured at times to advise professionally the National Association of Investment Clubs, and I am not a member of any investment club. Having

made that clear, I should say that my prime interest and concern is to advance the cause of savings generally and that of the small investor in particular.
Apart from a brief reference which I made about 5 a.m. during the Committee stage which you, Mr. Deputy-Speaker, properly ruled out of order, I do not think that investment clubs have been referred to at all during the passage of the Bill. I should, therefore, make it clear that there has been a most dramatic development in the growth of these clubs. In 1958, there were no more than about a dozen. Today, there are over 2,200. They have an average membership of 25, and they invest about £5 million per annum, which is more readily understood if I say that about £3 or £4 per member


per month is invested through investment clubs.
These clubs cover a very wide section of the community. I know that there is at least one Young Conservative investment club, but there are also clubs for the Ford's assembly line, for the night workers of Pressed Steel and for the compositors of the Daily Mirror. All these people and many others throughout the country are interested in this movement. They are nearly all investors who are practising thrift and providing vital risk capital for industry. They are learning about investment and how the economy works. They are genuine long-term investors in the main, because the dividends and incomes which they earn from their investments are invariably ploughed back. They are doing what the First Secretary wants us to do, namely, channelling surplus income into investment in industry rather than into consumer spending or gambling.
As a result of the Bill, investment clubs find themselves in a quite impossible position. It should be understood that an investment club is not a legal entity as such. Its individual members are direct owners of a piece of every investment or cash holding in the club. The clubs, therefore, will have to prepare tax assessments for each member. This involves enormous complications, because members of clubs come and go from time to time and they contribute different amounts, not only between each member, but also because a member may from time to time vary his own contribution. The result is that each time a club sells a security each member has a different assessment from a Capital Gains Tax point of view, not only as a percentage of the total funds which he holds, but also according to how it is arrived at in terms of his monthly contribution.
As an example, let us consider the average club consisting of, say, 20 members and assume that it has an average portfolio of 20 investments. This involves the club having to make no less than 400 calculations per month, or 4,800 calculations per annum. But that is not all. A list has to be prepared involving the adding up of 240 figures for each member of the club. This list for each member has to be sub-divided to indi-

cate the shares bought and sold within 12 months whilst the member was a member, shares sold within 12 months of purchase but purchased before he became a member, shares sold after 12 months of purchase but sold while he was still a member and shares bought while he was still a member but not sold until after termination of his membership. This latter group has to be subdivided into shares held less than and shares held more than 12 months. I am not sure what the assembly line workers at Ford's will make of all this, but I suspect that the language of their meeting would be very unparliamentary.
The problems of investment clubs are, in a sense, not entirely dissimilar from those of unit trusts, but there is a basic difference. The Capital Gains Tax is difficult enough for unit trusts, as we heard frequently in Committee, but a unit trust is at least a legal entity. It has the advantage of professional management and it can gain tax relief for its running expenses and the cost of management.
The position is quite impossible for investment clubs. They do not have professional management and they certainly cannot charge their expenses against tax. In view of the fact that, I understand, many meetings of investment clubs take place in licensed premises, that is, perhaps, particularly sad. It is not surprising, therefore, that the National Association of Investment Clubs reports a falling off of club formations, not only since the General Election, but even more so since the publication of the Finance Bill.
Two clubs at least to my knowledge have been disbanded. Perhaps I might indicate the rather pathetic situation from the point of view of these clubs by quoting from a letter from an investment club in Ilminster, which states as follows:
At our annual general meeting we sadly decided to cease investment, sell our holdings and distribute to members. After much thought we felt that it was quite unreal to expect any person to undertake the work involved by the new taxes. This appears to be a job for a computer rather than a person.
This is particularly sad and, as a result, in the present state of uncertainty, no new clubs are being formed.
I believe that there is a good social and economic case for excluding investment clubs altogether from Capital Gains


Tax, but we are not asking for that in the new Clause. We do not ask for any monetary concession. All we ask is a modest reasonable working arrangement to enable investment clubs to continue.
5.15 p.m.
The new Clause is designed to ensure that an inspector of taxes can calculate the overall tax liability of a club and then accept an apportionment made under the rules of the club for the purpose of assessing individual members. As there may be a slight concession in respect of short-terns capital gains, and because of the well-known sensitivity of the Treasury Bench lest there should be any danger of richer people benefiting—what I call my anti-tycoon proviso—we have provided that it shall not apply to clubs in which anyone holds more than £1,000. Furthermore, we propose giving to an inspector of taxes power to make assessments on the normal basis where he is of opinion that an individual is obtaining benefit exceeding £100.
The last time that I moved a new Clause in Committee on behalf of what I thought were the interests of small savers, I said that I was endeavouring to salve something out of the wreckage of the Bill. The last new Clause was sunk without trace. This one really is the last diver going down to the wreck to try to do something for small savers.
If the Government are opposed to the new investor or the small man in the spread of wealth, I could understand their rejection of the Clause and their neglect of the interest of investment clubs. I should not agree with it, but I could understand it. I do not, however, believe that that is the case. I believe that the Chief Secretary is quite genuine in his remarks on the question of savings. If, however, the Clause is rejected and if nothing is done for the investment club movement, I regret to say that the Chancellor will go down in history as the man who destroyed one of the more exciting phenomena of recent times, the do-it-yourself investment movement.
The Chief Secretary, who, I understand, is to reply, said on 24th June that
Savings are to be encouraged in every possible way—large savings, small savings.
He went on in the same passage to express his personal view:

I think that saving is in every sense encouraging to the character of the individual, and wholly to be recommended from what-every point of view one looks at it. So there is no doubt where we stand about encouraging saving."—[OFFICIAL REPORT, 24th June, 1965; Vol. 714, c. 1976.]
I take the right hon. Gentleman up on that phrase tonight and express the hope that we may see those fine words, with which I agree and which, I am sure, he holds sincerely, matched by deeds. In that hope, looking hopefully at the Chief Secretary, I move the Clause.

Mr. Deputy-Speaker (Dr. Horace King): The Question is, That the new Clause, charmingly moved by the hon. Member, be read a Second time.

The Chief Secretary to the Treasury (Mr. John Diamond): I hope, Mr. Deputy-Speaker, that if I achieve an equally successful and charming answer, that, also, will be recorded in your reply.

Mr. Deputy-Speaker: Charm is a non-political term.

Mr. R. Gresham Cooke: I should like to put on the record exactly my interest in this matter. I am a deputy-chairman of the Wider Share Ownership Council. In that position I have never received any remuneration or expenses at any time; it is an entirely honorary position. To put it on the record, as the hon. Member for Manchester, Cheetham (Mr. Harold Lever) is present—he is also one of the deputy-chairmen, and we are honoured to have his assistance—some six or seven years ago I moved a Motion in this House in favour of wider share ownership. It was very well received and passed.
As a result of that, I approached my then hon. Friend the Member for Halifax (Mr. Maurice Macmillan) and Sir Toby Low and between us we formed the Wider Share Ownership Council. Mr. Maurice Macmillan then became chairman and I have always remained deputy-chairman. We have been on an all-party basis. The hon. Member for Cheetham is a deputy-chairman as also is the hon. Member for Orpington (Mr. Lubbock) and we have members also in the House of Lords on an all-party basis. Having said that, I hope that the beneficial interest that we are trying to show is one that will receive the sympathy of the House.
The new Clause, which has been so ably moved by my hon. Friend the Member for Harrow, Central (Mr. Grant), is a small administrative measure to help investment clubs. Investment clubs meet in canteens, public houses, private houses, after hours in offices, and so on. I have in front of me the story of one of them, which comes from Bridgwater, in Somerset. It started with 15 members and now has 33. They were clearly handicapped because they had among them no one with investment experience, no accountant and no stockbroker. However, they were later introduced to a London stockbroker. The first year proved disastrous, and though the club's first purchase, British Industrial Plastics, was later sold at a profit of 64 per cent., other purchases went the other way and included Vactric which, after a meteoric slump, finished in liquidation.
So it is not all a bed of roses. They go on to say that, despite the initial setbacks, the club held together and the £1 units which were at one point worth little more than 14s. have now recovered to nearer 28s.
Those are the sorts of clubs of which we are speaking. The Inland Revenue should help them because, as far as I can see, there is nothing in the Bill to help the small investor at all. I hope that the Chief Secretary will not tell us, "Well, we like the object of the Clause and would like to be able to help, but it is not legally sound, and it is no good passing the Clause." I feel that the Chief Secretary is like the headmaster who says, "This is good for you, but it hurts me more than it hurts you." I ask him not to be mean to these small people who are struggling with investments, and to pay attention to the words of the President of the Board of Trade when he was interviewed by small investors a year or so ago. They asked him, "Do you believe in wider share ownership?", and he said, "Yes, certainly." Their next question was, "What is your attitude to investment clubs?" and he replied, "I know a little about your movement, and many new investors are in need of a great deal of guidance.
"I would encourage reputable organisations, such as the National Association of Investment Clubs, to help give guidance

and information to small investors." He realised what we must all realise, that these people want all the assistance they can get. Therefore, the suggestion in the Clause about the assistance of the inspector over the Capital Gains Tax is not asking for too much.
Whether the President of the Board of Trade's advice later in the interview was so helpful, I do not know. He went on to say, "I do not see why share prices should not rise under a Labour Government. There will be full employment and planned and regular expansion of production. That should be reflected in equity shares."

Mr. Harold Lever: In desiring to encourage investment clubs to buy ordinary shares, surely the hon. Gentleman has in mind the expectation that they will rise under a Labour Government.

Mr. Gresham Cooke: If we get galloping inflation, anything may happen to equity shares.
Here is a fairly simple Clause which invokes the help of the Government for the small investment clubs. It is obvious they cannot employ accountants at great expense to guide them. They cannot employ secretaries to make the necessary calculations, and they should be entitled to look to the State for some assistance. What would be better than for their own inspectors to help them? They are helpful men, and I see no reason why the inspectors should not help investment clubs in their particular districts.
I have much pleasure in supporting the Clause.

Mr. Geoffrey Lloyd: I support the new Clause moved by my hon. Friend the Member for Harrow, Central (Mr. Grant). I also am a member of the Executive Committee of the Wider Share Ownership Association and president of the Birmingham branch of that association, but I have no personal financial interest of any kind, nor do I receive any fees or professional profits in any way connected with the organisation. I am interested in it as an important social and economic movement.
It is true that in the Finance Bill, whatever they may say, the Government have injured the interests of investors, particularly the interests of small investors in


investment clubs and unit trusts. We are seeking by the new Clause to undo some of the harm the Government have done, particularly to investment clubs.
I should like to give a measure of the importance of this movement, without either exaggerating or minimising it. My hon. Friend mentioned the figure of some 2,000 investment clubs, but, as I think he will agree, within that figure there is a more precise one in the number affiliated to the National Association of Investment Clubs. It is obviously a smaller number, because not every club is affiliated to the Association, but it gives us an important measure of the growth of this movement. It started in 1958 with 16 clubs affiliated. In 1959, the number rose to 80; in 1960, to 324; in 1961, to 474: in 1962, to 585; in 1963, to 651; and in July of last year it had topped the 800 mark for the first time. As my hon. Friend said, this is the first year in the history of the movement that there has been a fall in the number of affiliations. There are now only about 700 clubs affiliated to the Association. More clubs ceased to be affiliated to the national organisation than became affiliated, and that is undoubtedly connected with the Labour Government and their Finance Bill.
A good measure of the vitality of the movement is provided by the number of people who apply for the manual issued by the Association for the formation of investment clubs. In the first quarter of last year, 264 of these manuals were applied for and issued. In the period from April to June of this year the number had fallen to 46. That is a great diminution, and it reflects the sense of disappointment and almost desperation of the clubs in the face of the Finance Bill. That is why we have brought forward the Clause.
My hon. Friend has said quite truly that there is a great variety in these clubs. That is a point which the House should face, because there is a problem here, and it is perhaps different for different kinds of clubs. Those associated with the movement will agree that there are two kinds of clubs. There are clubs of which the members are mostly professional people and junior executives with a good deal of business knowledge. On the other hand, there are clubs formed by working men in factories.
The new Clause will help both but, if I may say so, the professional type of investment club is more capable of dealing with difficulties which arise than those formed in factories. It is the clubs in factories in which I take a special interest, because here I think we are dealing with quite a new social movement which enables a man who hitherto has had no interest at all in investment to put his toe into the water and make the first step with a minimum of personal risk. Therefore, in dealing with the Clause, I should like to point out the difficulties facing the kind of club which I have in mind.
5.30 p.m.
I am thinking particularly of a club in the tool room of a big car firm in Birmingham. Perhaps I ought to mention in passing that the chairman of the club is a member of the Labour Party. It started in 1961 with 40 members. It now has 60, and altogether throughout the five years it has had 80 members. The club's subscription in 1961 totalled £8 a week. It now totals £22, and in relation to this Clause I ask the House to consider the subscriptions of individuals. Some of them subscribe 2s. a week. Others subscribe 4s., 6s., 8s., 10s., 12s., 14s. and some subscribe £1. No dividends have been declared in the five years, and all the money has been ploughed back. The club has a planned life of five years. The committee of seven members meets once a fortnight. In April, 1965, the book value of investments was £2,442, while the current value, in spite of the Labour Government, is £2,547.
The point that I should particularly like to make with regard to this club, and the six others that I shall mention in passing, is that it is the members of this type of club who find it difficult to deal with the complications imposed by the Bill. There is an important social point of view to be borne in mind here. Seven members of this club have now made their own individual investments. This is extremely interesting, because it shows that individuals, after their experience as members of an investment club, feel that they can become individual investors on their own. Whether they have acquired enough experience in so short a time to do it is perhaps a matter of opinion, but the fact is that they do.
In these same works there is also the Works Engineers Department Investment Club which has 10 members, and the United Investment Club in the Cost Office Department, which has 10 members and invests £25 a month. There is also an investment club in the Material Costing Department. This club has 30 members, each of whom subscribes £2 a month. There are two investment clubs in the administration and supervisory block. Finally—and this is a club which I put before the House and ask that it be given sympathetic consideration—there is the Apprentices' Investment Club, which was started in January of this year, and has 20 members. The minimum subscription is £1 a month, and the company has lent £50 for a year to get the club going.
The apprentices' club differs in its philosophy of investment from all the other clubs in a way which I suppose is slightly characteristic of youth. It believes more in speculation, whereas the other clubs are more concerned with solid investment. I think we may feel that if the apprentices are attracted to taking a bit of a risk there is no harm in that at that age, and that they may sober up and become more careful investors as time goes on. This is a valuable social movement, and if it is not discouraged by this Bill it is likely to expand. It might expand on the lines of the American system, where there are about 10,000 clubs with investments of about £18 million in terms of dollars.
These clubs now feel that they are faced with the problem that when members leave the club they have to be paid out, they have to be provided with a certificate of their proportion of Capital Gains Tax, new members join the club, and from then on have to be included in the calculation of profit divisions for tax purposes. In addition, many club members can vary the amount of their sub-subscription to the club, and they are allowed to withdraw some of their capital from time to time. Because of all the foregoing reasons, the individual proportion of ownership of each separate investment will change month by month, and this is the kind of difficulty for which we seek a remedy, because while it is difficult for unit trusts with strong professional staffs to cope with the kind of problems that arise, the type of working man's

club of the kind to which I have referred, which has not the same panoply of professional guidance, will find it much more difficult to cope with the difficulties facing it. They take the view that the Government expect them to have a computer to work things out, but this is too much to ask and so they close down.
I hope that the Government will either accept the Clause, which would be the best thing, or give us some prospect of a real solution of this problem.

Mr. Diamond: I think that I ought to follow the precedent which has been set so far and declare my interest. I am the Chief Secretary to the Treasury. For a period up to about December last I was an honorary occupant of that office, but now, thank heavens, I am paid. Having declared that interest, perhaps I can come to the point of the Clause and say that there is no difference between the two sides of the House about the desire, as I have said many times both from that side of the House and perhaps a little more authoritatively from this side, to help investors large and small, and to help the savings movement in every way that we can. I am anxious in particular—as is the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd)—to help the savings movement in factories. Indeed, this is a very important part of the movement, and I repeat that we are anxious to help every kind of savings, large and small, in every sphere of life, so there is no difference between us on that score.
The Clause seeks to remove any administrative difficulty which would discourage savings of this kind. There is no difference between the two sides of the House on that either. The Government are as anxious as the Opposition are that no administrative difficulty should be put in the way of saving. What the supporters of the Clause are concerned about is that a literal interpretation of the present provisions might cause administrative inconvenience and therefore discourage saving.
This is not the first time that this problem has arisen. It arose in 1962, with the short-term gains tax, and the provision there had to be accommodated to the varied informal constitutions, or lack of constitutions, of these various savings clubs which we are now considering.


Accordingly, discussions took place between the Revenue and the Association, as a result of which, under the previous Government, administrative arrangements were arrived at which, so far as I am aware, have worked perfectly well.
The Government are anxious that the same kind of conversations should take place so that administrative arrangements can be arrived at which will work well here, too. But the supporters of the Amendment—I am sure that they have not thought of it in this way—do not wish to allow this flexibility in administration, and want to tie it down in a way which, for reasons which I can demonstrate, will not work. But that is not the important part. The supporters of the Clause want to remove this flexibility.
If right hon. and hon. Gentlemen opposite think about it, they will realise that this is not the best way of going about the job. We are all agreed about our major objective of encouraging savings, and about our lesser objective of removing any discouragement or deterrent through excessive administrative difficulties. The way to remove the administrative difficulties is to allow the Inland Revenue and the Committee of the Association to get together and to work out an arrangement such as has been worked out previously for the short-term gains tax and which would accommodate the various difficulties which arise.
Difficulties arise because, by and large, these clubs are not trusts. The new Clause refers to trusts, and it would therefore be wholly unsatisfactory from the beginning—but that does not matter, because in the House we deal not with the words of a Motion but with the intentions in the mind of the mover. The majority are not trusts. Most of them have no constitutions of any kind. There are various arrangements. Some are members of the Association but a great number of them are not members of the Association. The turnover of membership within the clubs is continually changing. People get interested, invest, lose interest and sell their shares to somebody else.
There has been very little growth over some period in the number of clubs or in the amount of the portfolio held on average by each club. It is unfortunately

rather static. We should like to encourage it to grow, as we should like to encourage all forms of saving to grow. In that respect there is no difference between the two sides of the House.
We are simply anxious to give to the Board the kind of flexibility which it needs to work out satisfactory administrative arrangements with a vast number of clubs of varying kinds, each of which has a different constitution from another or has no constitution at all. As this flexibility which we desire would be denied to us by the Clause, I hope that the House will not wish the new Clause to be pressed but will leave us free to do what the previous Government did—to work out an arrangement as between the Board and the Association which will ensure that the minimum of administrative difficulty arises and which will enable an administrative arrangement to be worked out which suits the capacity of the saving clubs, and the kind of knowledge and expertise which they have and which will enable them to work reasonably satisfactorily.
As we are all after the same objective, I hope that I have satisfied the House that although the moving of the new Clause has served a useful purpose in airing the topic, the Government are fully alive to the problem and are anxious to meet the needs of savers and to encourage all forms of savings, small and large, including this form, but believe that the best way is to allow the kind of flexibility which I have mentioned.

5.45 p.m.

Mr. Raymond Gower: On this side of the House we were reassured in large measure by the attitude which the Chief Secretary took in his speech. I had always hoped that the right hon. Gentleman the Chancellor of the Exchequer and the Labour Party in general would be as anxious as we are that small investment should be encouraged, and in particular that small investment of the kind which has been practised in investment clubs in recent years should receive every practical encouragement. Whatever his feelings about the details of the right hon. Gentleman's speech, I am sure that my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) was glad to hear the assurance that that is the Government's view.
I have always had some anxiety about this, because there are some Socialists, perhaps more extreme Socialists than most, who would not particularly welcome a wider extension of investment. Indeed, they would feel that the success of these clubs would militate against the continuous growth of ideal Socialism because it would create a larger number of people who had a vested interest, if one may so describe it, in the extension of share ownership in the capitalist system.
Before we part with this Clause, however, we should like an assurance from the right hon. Gentleman that the powers which exist in present legislation, without any further amendment of the law, are sufficiently flexible to enable the Inland Revenue to make arrangements with clubs of such diverse characteristics. It would, indeed, be unfortunate if at this stage we did not amend the law and during the year ahead these clubs found themselves increasingly embarrassed by statutory difficulties. As the right hon. Gentleman pointed out, in 1962 they had to contend with a new dimension in the form of the short-term Capital Gains Tax. But I remind him that the longer-term tax which has been introduced as far more far-reaching and is greater in its effect on clubs of this kind.
My right hon. Friend the Member for Sutton Coldfield has mentioned the arrangements under which these clubs must work. I have become acquainted with one or two clubs, and as everyone else has declared some interest, I should explain that recently I have been associated with the Wider Share Ownership movement, without any financial benefit therefrom. The Chief Secretary is aware that even without any Capital Gains Tax of any kind, it is a rather difficult job for some of these clubs to maintain their secretarial organisation. It is a very involved business for them in any event, and then they suddenly have imposed this very difficult job. If it proves burdensome in the extreme to the investment and unit trust, how much more burdensome is it for trusts of this kind?
I hope that the right hon. Gentleman will be able to assure us that the existing powers will enable the Commissioners

of Inland Revenue and the inspectors locally to meet the various requirements of these many trusts. That this is of very great importance has been shown by the news given by my right hon. Friend and repeated by my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) that since the General Election, and particularly since the publication of the Finance Bill, there has for the first time been a gradual decline in the appearance of new clubs.

Mr. Geoffrey Lloyd: A sudden decline.

Mr. Gower: There has been a decline in the appearance of new clubs. Perhaps it is partly because the atmosphere has not been conducive and perhaps it is because the clubs, like the ordinary investor, have been deterred by the fears of new legislation.

Mr. Donald Box: Does not my hon. Friend also agree that this provision is also essential for the sake of the Inland Revenue, because as the Bill stands the Revenue will be called upon to account for demands for very small sums. Did my hon. Friend notice the statement in the newspapers over the weekend that they had had to increase wage rates by 10 per cent. because they were so short of personnel?

Mr. Gower: I suggest to the Chief Secretary that although he may find the terms of my right hon. Friend's Clause too rigid, some such formula seems essential to meet the needs of Inland Revenue in the present system, which we fear must place great difficulty on the Revenue as well as on the clubs. I sincerely hope that the right hon. Gentleman's assurance will be justified in the months ahead. This is one of the most interesting developments of the post-war years. These are the investors of tomorrow. They were brought into investment by these clubs. Let us hope that these clubs will continue to function.

Mr. Joel Barnett: As so many of those who have spoken have declared that they are members of the Wider Share Ownership Committee, or some other such committee, may I immediately say that I am not a member of any such committee. Nor do I professionally advise any investment club. It has been alleged that Socialists


may not want to see the growth of wider share ownership. I should have thought that the contrary would be the case. In view of this Finance Bill, there will be greater encouragement for plough-back to take place and a consequent growth in productivity. There will, therefore, be a growth in the capital value of the money invested.
I have considerable sympathy with the case which has been made for the encouragement of small savings. Unfortunately, most of those who have spoken in support of the Clause have dealt entirely with the question whether investment clubs should be encouraged to expand. They have not dealt with the Clause itself. As my right hon. Friend the Chief Secretary said, there cannot be many hon. Members who would not want to see a growth in savings, particularly of this type—that is small saving in industrial shares, the type where the return on the investment is ploughed back. It tends to be further invested and not spent in the way in which, for example, savings in the Post Office Savings Bank are spent, because they can be withdrawn merely by slipping round the corner. There is no doubt that most hon. Members would want to see a greater encouragement of small savings of this type.
Most of those who have spoken, however, have not given sufficient thought to where their arguments lead. Much of what they said would militate against investment in investment clubs. The right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd) said that many small investment clubs do not have professional management. I should have thought that the last thing that hon. Members would want to do would be to encourage small savers to invest in organisations which are not very well managed. Perhaps there should be a rather more fundamental examination of how best to encourage small savers. The best way might be to enable small investors to invest in a first-class unit trust on a weekly basis by buying locally, say at a local post office. A unit trust, by its very nature, is bound to be much better managed than an investment club, particularly some of those of the type which has been described.

Mr. Grant: The hon. Gentleman must bear in mind that more skilled and pro- 

fessional management is necessary because of the difficulties created by this Finance Bill.

Mr. Barnett: The hon. Gentleman should not be quite so naive as to suggest that decent management for investment clubs is needed only because of this Finance Bill. I am sure he is not suggesting that they did not need first-class professional management before. One crying consideration when deciding whether small savings should be encouraged via investment clubs is whether this method gives small savers the best type of investment, the one with the least degree of risk, the one with the best management, and the one which will give a growth of capital.

Mr. Eric Lubbock: Would not the hon. Gentleman draw a distinction between professional management and professional advice? Does he not recognise that, although many investment clubs are far too small to employ professional managers, there is nothing to stop or inhibit them from obtaining professional advice?

Mr. Barnett: I am not suggesting for a moment that they are not able to obtain professional advice, but it is still valid to argue that it would be easier for a large, well-managed unit trust to obtain better and wider spread advice than for a small investment club. I am arguing that hon. Members opposite who have spoken in favour of greatly encouraging the growth of investment clubs perhaps have not examined their case sufficiently.

Mr. Geoffrey Lloyd: I am sure that we would all agree that the unit trust is a very fine method of investment. However, would not the hon. Gentleman, in his analysis of the advantages or disadvantages of investment clubs vis-à-vis unit trusts, take into account the educational advantages of investment clubs, in that their members actually play a part in considering the merits of the various companies considered for investment? We think that this is a very important point.

Mr. Barnett: I am not saying that investment clubs are wholly bad. There are some very fine investment clubs. This type of investment, indeed any investment which encourages the growth of savings,


merits examination, but we should at least be doing that.
Few hon. Members have spoken on the Clause itself. In my view, the Clause does not help. The hon. Member for Harrow, Central (Mr. Grant) spoke about adding up enormous numbers of figures. I have sympathy with those who have to do that. It is a long time since I did it myself, but I have had to do it in my time. Therefore, I can sympathise in the matter of the administrative problems and complications involved. But I repeat that the Clause would not help. It has been suggested that we must try to ease the burden on inspectors of taxes. Subsection (5) says:
if the Inspector is satisfied that such apportionments are reasonable and not likely to give a substantial tax advantage …
To leave this sort of problem to be decided by a tax inspector is not to ensure what the hon. Gentleman has in mind. I know that the hon. Gentleman is leaning over backwards to try to guard against any possibility of avoidance, but subsection (8), which is designed to deal with this point, would only make matters worse: It says:
If in the opinion of the Inspector any individual who is a member of one or more investment clubs has obtained thereby a tax advantage exceeding £100 he may assess that individual with regard to the true value of his interest etc., etc ….
This will hardly make for easier administration, either for managers of investment clubs or for inspectors of taxes.
What my right hon. Friend the Chief Secretary said is by far the most reasonable suggestion, namely, that investment clubs can consult local inspectors of taxes, who are very reasonable people. This would produce the most satisfactory results. I also hope that those who support the Clause will give more consideration to whether this is the best type of small saving to be encouraged.

Mr. Harold Lever: My interest having been declared for me by at least three hon. Members opposite, I want only to say a few words of welcome for the spirit in which the Clause has been put forward and, even more, for the response of my right hon. Friend the Chief Secretary, which was impeccable from the point of view of those who want to encourage

wider share ownership. I shall not prolong the debate. I appeal to my fellow presidents and vice-chairmen not to divide upon the Clause, but to withdraw it, in the light of the spirit in which the Clause and the argument adduced in its support have been received by my right hon. Friend the Chief Secretary. Not to do so would be to do a disservice to the movement which we all wish to support. It would, wrongly, give the impression that the Government were in some way opposed to this movement. I hope that the Clause will be withdrawn.

Mr. Peter Walker: Before the Chief Secretary rejoices too much at being praised by his hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), may I remind him that only a few days ago the hon. Member for Cheetham wrote an article saying what a good Finance Bill it was beginning to turn out to be? Two days ago we learned that a move was to be made to delete most of the Clauses.
In view of what the Chief Secretary has said, I would advise my hon. Friends to withdraw the Motion. However, may I express the hope that the Chief Secretary will ensure, in the negotiations which take place, that the genuine spirit of the Clause—he knows what we are trying to achieve by the Clause—is interpreted and put into practice.
6.0 p.m.
Then I would draw attention to the fact that this position has previously been negotiated and there has been a satisfactory arrangement about the short-term Capital Gains Tax. During the last few years this movement has extended, as we have heard. Therefore, I would have thought it was possible for the Treasury to put into the Bill—

Mr. Diamond: indicated dissent.

Mr. Walker: The Chief Secretary says "No", but I am certain that it would have been possible to put into the legislation the manner in which investment clubs would be treated. The fact that this has not been done means that investment clubs throughout the country will be unaware of the position until some arrangement is made, and then only those which are members of the National Association will be circulated with the details of the arrangements made. There


will probably be considerable confusion in the coming months as a result of the position not being made clear at the time of this Bill being passed. This is a rather complacent attitude to a very important and hitherto expanding movement.
We had the usual declaration from the Chief Secretary, saying how he believes in encouraging savings and movements such as this. I should have thought that the Government would have been desperate at this time to encourage more savings. There has never been a time in recent years when the savings movement and personal savings needed more encouragement. It is important for the Government to encourage movements such as this, in the same way as they should encourage other forms of saving, because the Government's economic policy is being undermined by their failure to encourage savings—and not only their failure to encourage but their positive discouragement to savings in recent months.
Last week we heard that the increase in national savings in the first 12 weeks of this year was less than one-quarter of what is was in the same period last year. We have heard also that the sales of unit trusts in the first five months of this year are 25 per cent. lower than in the corresponding period last year. These are startling figures and they are undermining the policy which the Chancellor states he is trying to put into operation. With the Corporation Tax discouraging dividend distribution, with the Capital Gains Tax affecting investment throughout, and with this general lack of positive interest in the investment club movement, can one wonder that the saving situation is deteriorating quickly?
I very much regret that the Treasury did not take some initiative on an important movement such as this and take action in the Bill, giving perhaps even more encouragement than was sought by my hon. Friend the Member for Harrow, Central (Mr. Grant) and positively encouraging savings. We have moved this Clause to ensure that the investment club movement shall receive an appropriate administrative arrangement. The Chief Secretary has at least given us that assurance, and for that reason I suggest that my hon. Friend should withdraw the Clause.

Mr. Grant: In view of the assurance which the Chief Secretary has given, I beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

New Clause.—(RELIEF FOR AGRICULTURAL DISPOSALS WITHIN THE FAMILY.)

(1) Where a person engaged in an agricultural or forestry enterprise conveys, transfers, leases or otherwise disposes of assets or his interest in assets used for that enterprise to any persons comprising a firm of partners of which he is one and the remaining partners are members of his family, for the purpose of the partnership carrying on an agricultural or forestry enterprise, the transaction shall be treated for the purposes of this Act—

(a) as if the consideration for the disposal of the assets, or his interest in the assets, were (if otherwise of a greater amount or value) of such amount as would secure that on the disposal neither a loss nor a gain accrues to him, and
(b) as if the value of the share in the assets, or in the interest in the assets acquired by him as a partner in the partnership were reduced by the excess of the amount or value of the actual consideration over the amount of the consideration which he is treated as receiving under paragraph (a) above,

and in this section "members of his family" means spouse, brothers, and sisters, of self or spouse, children over 18 years of self or of spouse or of brother or of sister.

(2) Subsections (4), (5), (7), (8), (10) and (11) of section 31 shall apply to this section as if "old assets" meant assets disposed of to the partners referred to in subsection (1) of this section, and "new assets" meant assets acquired by those partners, and "trade" means agricultural or forestry enterprise.—[Sir M. Redmayne.]

Brought up, and read the First time.

Sir Martin Redmayne: I beg to move, That the Clause be read a Second time.
This Clause seeks to ensure that when, in particular, a farmer takes his son into partnership there is no loss of capital to that enterprise by reason of Capital Gains Tax.
The points have been covered broadly in Committee with reference both to farming in particular and to private business in general. A good deal of progress has been made in respect of relief on retirement and there is a better understanding about the replacement of business assets. However, we have tabled this Clause because it seemed to us that here was a case where there was still in the Bill a strong disincentive to men


to take their sons into partnership, particularly in a small enterprise like farming, because they would then be liable to Capital Gains Tax.
It is true that the Government showed a little sympathy for this point in Committee. When I spoke in Committee the hon. Member for South Ayrshire (Mr. Emrys Hughes) accused me of making an emotional speech, which I took a little hard from a Member who is a master of perpetual emotion; but, in any case, it was not without some value because I thought that my plea was not unanswered by the Financial Secretary at Column 856 of the OFFICIAL REPORT of 27th May.
I will not quote at great length, but it is relevant that I should quote a small passage. He said:
The second Amendment is based on a case which we have considered a number of times in Committee and which has aroused a good deal of interest and sympathy …. That is the case of the disposal of a farm handed on, perhaps, by a farmer to his son.
I am leaving out one or two sentences.
I said yesterday that there was a real problem here and I said that I would look into it. We will be coming to the question of the man who disposes of a small business in similar terms—on retirement, perhaps to provide for his retirement—and there is obviously an analogy here. What I have in mind is that we should consider that in relation to this question of farming land. Apart from that—which, as I say. I regard as a special case—I do not see any reason or grounds why farming land as such, or an interest in farming land, should be singled out for special treatment compared with any other form of capital gain."—[OFFICIAL REPORT, 27th May, 1965; Vol. 713, cc. 856–7.]
That is a point of view which is understandable on the part of a Government bringing in this new tax. At the same time—and I have said this before—farming is a special case, not because it deserves any special sympathy or compassion but because it works in an artificial situation created by the policies of successive Governments and has to be sustained by grants and subsidies, and, because of its great expansion, it is inevitably short of capital. Therefore, if it is robbed of capital at any stage, as it will be if it is assessed for Capital Gains Tax, foreign capital has to be reinjected into the industry. Here we shall have a case in which the Treasury is not, as it

so often is, robbing Peter to pay Paul; it will be robbing Peter to pay Peter. That seems to me to make very little sense.
In its drafting we have tried to narrow down the Clause as much as possible so that it meets the case of the farmer who wishes to take into partnership primarily his son, but also, by definition, other members of the family. We have done this intentionally to make it all the easier for the Government to accept the Clause. In any case, as it is drafted it is only a deferment of tax, in precisely the same sort of terms in which Clause 31 defers the payment of tax in relation to the reinvestment of business assets, and to which the Financial Secretary in the passage which I quoted admits there is an analogy.
In this case the father would reinvest part of the proceeds of the enterprise in the same enterprise instead of in a parallel one. On those grounds, I feel that the Clause ought to be acceptable to the Government. In due course, the enterprise will be caught on the retirement of the father, or equally on his death, as, indeed, it will catch us all in time.
On a similar point in the course of these debates the Financial Secretary to the Treasury suggested, although he did it in a very mild way, that young men were frequently taken into partnership for the avoidance of Estate Duty.

Mr. MacDermot: No, I did not say that. I said that quite often—and this was the case which the hon. and gallant Member for Down, South (Captain Orr) raised—the farmer who transfers the farm to his son at a time of his retirement does that rather than bequeath it to him under his will in order to escape death duties, and that proposition was accepted.

Sir M. Redmayne: I said that the hon. and learned Gentleman said it without malice and very mildly.

Mr. MacDermot: But I did not say what the right hon. Gentleman suggests. This is a different thing. The purpose would not be served by bringing the young man into partnership. I was talking about complete transfer.

Sir M. Redmayne: I accept entirely what the hon. and learned Gentleman has now said, but even if he did not say what I suggested earlier it can be said


that Estate Duty has been to some extent an incentive to elderly men to pass on part of their estates to their sons, and Capital Gains Tax as at present drafted has the opposite effect.
We have been told time and again that throughout the various stages of the Bill the House has accepted the principle of a Capital Gains Tax and, therefore, having accepted that principle, it must also accept the principle that it strikes ever so often on change of ownership. In view of what the Financial Secretary has previously said and the special circumstances in the farming industry I hope that the Government may be disposed to accept the new Clause, I hope as drafted. If not, I ask the Financial Secretary not to allow himself to escape on the argument which he used last night that there is nothing to be done at this stage of the Bill.
This is not true. If on any proposition which we put to them the Government are sufficiently prepared to accept it in spirit even if they cannot accept the drafting, it is perfectly simple for them to recommit the Bill in respect of that item. If they choose to do that in this very good case we shall not hold up the business of the House in any sense.

Mr. J. Grimond: As we are discussing relief on the disposal of an agricultural asset, may I thank the Financial Secretary for kindly writing to me about the point raised in Committee and for making clear that, as I thought, the compensation payable to crofters on the termination of a crofting tenancy is not liable charge for capital gains?
May I ask a question which I think it would be convenient if the Financial Secretary could answer now? I understand that it is clear under Schedule 6(4,1,b) that if a farmer increases the value of his farm by expending his own money he is not chargeable for any Capital Gains Tax on the extra value which his farm therefore acquires. To put it simply, if he spends £12,000 and out of that £8,000 is his own money he is not liable to charge on that, but what happens to the proportion which may well be grant? If £4,000 of the £12,000 is grant, is he liable for Capital Gains Tax on the grant? It would be convenient

to have an answer on the record in conjunction with the Clause.

6.15 p.m.

Mr. Barnett: It cannot be said strongly enough that the really small farmer or business man is not affected by Capital Gains Tax at all. The small farmer will not be affected by the Bill, because if he sells to buy another farm Clause 31 gives him relief, and if he retires he is covered by the new Clause 30 up to £10,000, and in my experience few small farmers tend to give their farms to their sons much before retirement.
The right hon. Member for Orkney and Shetland (Mr. Grimond) referred to grants. A grant given to a farmer is liable to Income Tax in the normal way. If he increases the value of a farm by plant, stock and debtors these increases are not subject to Capital Gains Tax. They are increases in profits and are subject to Income Tax. Increases in the value of plant, stock and debtors—and vehicles are a good example—will not be subject to Capital Gains Tax for a very good reason. It is extremely unlikely that plant and vehicles would increase in value from the date of first purchase, and any increase over the written-down value for capital allowance purposes would be subject to a balancing charge for Income Tax. There would be no question of Capital Gains Tax applying because these increases are a reflection of increased profits, subject to Income Tax or Corporation Tax.

Mr. J. E. B. Hill: I understood the hon. Gentleman to say that the Government grants for agriculture are subject to Income Tax, but he will remember that many Government grants are capital grants paying one-third towards approved capital expenditure and are not subject to Income Tax. Therefore, I think that they would be allowable deductions from the computation of eventual capital gains.

Mr. Barnett: It depends what the hon. Member means by a capital grant. If it is for the purchase of an implement or a machine, this would reduce the capital value on which the farmer can claim capital allowances and when he eventually sells there will be a balancing charge subject to Income Tax. The assets which are caught for Capital Gains Tax are


land and goodwill and nobody would surely claim that for a small farm there would be any goodwill when it came to a sale.
Throughout the stages of the Bill we have had ad nauseam the plea for the small farmer, but for the small tenant farmer the Capital Gains Tax will not apply because the increase in value on his tenancy, the increase in manurial value, will be subject to Income Tax in the normal way and not to a Capital Gains Tax. There will be no Capital Gains Tax to the tenant farmer on land. In practice it will apply only where there is a sale of buildings or land as such. We know that there are cases where farmers sell some land for building purposes and make large capital gains. I should not have thought that even hon. Members opposite would wish to exclude that type of sale from the Capital Gains Tax.
As to the small farmer and the increase in the capital value of his farm, as I have explained, it is only the increase in the agricultural value of the land which is really at the heart of the problem and this would be covered on retirement by new Clause 30 giving exemption up to £10,000. So I hope that we will now hear no more about the harsh effect of this tax on the small farmer.

Mr. J. E. B. Hill: The small farmer may be subject to Capital Gains Tax in a variety of ways. His farm may become one of about 150 acres in future, which is the optimum size that most countries are aiming at. It is conceivable, therefore, that the value of his holding might be about £30,000, and there is a great deal of scope for capital gains in that. The hon. Member for Heywood and Royton (Mr. Barnett) may have overlooked a possible source of capital gain for which, as far as I know, no provision has been made by the Government. This is the question of herds kept on a herd basis where, by express arrangements between the farmer and the previous Government, the farmer made an option for all time from which he cannot resile to exclude his herds from revenue computation each year and bear the risk and reap what may or may not become a capital gain. This is one answer to the hon. Member.
More important than the figures is the psychology behind the new Clause. What we wish to do—again, I am sure that this is part of a common agricultural policy—is to encourage the younger generation into managerial positions so that they will bring in up-to-date knowledge and modern techniques. I think that it must be fairly common experience that father is sometimes apt to hang on a bit too long in the management of his farm, particularly as he and his son who may succeed him are living in the farmhouse anyhow. It is desirable, therefore, that we do everything possible to encourage the handing over of responsibility from one generation to another fairly promptly. Whether or not its ultimate incidence will be very great, if it is thought that the Capital Gains Tax will be applied, farming fathers will, on the whole, be rather chary of entering into formal arrangements with their sons, however much their sons ought to be given a proper share of responsibility in a partnership.
Moreover, the farming partnership may become progressively more important as a direct result of this Bill. At present, one often finds a family farming company which may or may not include the farm as an asset of the company. The disadvantage of this Bill is that, if the farming company realises any of its assets during its time as a company, it will pay Capital Gains Tax on those assets, and then, later in the family history, perhaps when father dies and the company is liquidated, as quite often happens in a single generation, because the shares will have appreciated by the increased capital value of the assets realised by the company, the asset will, as far as the family is concerned, suffer taxation twice. This will be a powerful reason for not having any more family farming companies, at least companies holding assets likely to appreciate.
Therefore, the only way of bringing other members of the family into positions of responsibility will be by some such arrangement as a partnership, the son coming in and no incidence of Capital Gains Tax at that moment. When father retires eventually the tax deferred may be raised, but, by that time, the son will have plenty of notice and, we hope,


be firmly in the saddle. For these reasons I hope that the Financial Secretary will accept the new Clause.

Mr. Jasper More: I support the new Clause. The hon. Member for Heywood and Royton (Mr. Barnett) said that, in his opinion, the small farm would not be damaged by the Clause. I put it to him and to the Committee that, when considering a taxing statute of this kind, we must project ourselves some years into the future and visualise the effect that it can have not just in relation to things as we know them today but in relation to things as they may be in five, 10 or 15 years. If we do the converse and look back to the state of affairs five, 10 or 15 years ago, we can see the possible dangers to what might be called the smaller farms to which a taxing statute of this kind might have given rise.
The new Clause is designed to aid or preserve those who want to keep a family farm within the family. We have discussed this in a number of previous debates, but the point still remains. The object of the new Clause is that a farming family which wants to continue its business shall not be penalised by values which it is easy to say have increased but which are nevertheless paper values. If the movement of land values continues, as it has in certain areas, and affects what are now called small farms in the way that has happened in the past two or three years, it will be entirely possible, unless there is a protective Clause of this kind, that the tax which might be leviable in terms of capital gains will be prohibitive and sufficient to prevent the carrying out of an operation of this kind, which, in the interests of agriculture and of the nation as a whole, ought to be encouraged.
I urge the hon. and learned Gentleman to consider this matter not merely in the light of things as they are now but in the light of the continuous process which has been so clearly visible in agriculture in the past few years and which, so far as one can see, is likely to continue. I hope that he will give us some encouragement by saying that he is prepared to accept our proposal.

Mr. MacDermot: Before replying to the debate, perhaps I may reply to the question asked by the right hon. Member

for Orkney and Shetland (Mr. Grimond), which, by no stretch of the imagination, can be related to the subject matter of the Clause. The answer to his question is "No". The fact that some of the moneys expended have been acquired by grant does not lead to any liability for Capital Gains Tax where there would be no liability if it had all come entirely from the man's own funds.
While I am dealing with minor points, perhaps I may tell the hon. Member for Norfolk, South (Mr. J. E. B. Hill) that I dealt with the question on the herd basis when we discussed the matter in Committee. It would be only in the very rarest case that there could be any liability in respect of the herd basis, and this would be only when each individual beast in the herd was worth over £1,000, which, I suppose, could only arise in the very high-class pedigree herd. I think that my answer will cover virtually all herds.

Mr. J. E. B. Hill: Each individual beast, not any one beast?

Mr. MacDermot: I do not follow the difference between each individual beast and any one beast. They seem to mean the same.

Mr. Hill: I thought that the hon. and learned Gentleman meant that Capital Gains Tax would be charged only on a herd in which each beast, if it was dispersed, sold for more than £1,000. What is likely is that some beasts would sell for £1,000 or more because the competition would be concentrated on the favoured animals. But there is the danger that a herd, particularly a limited blood line herd, might be considered as a set because there would be no other herd holding that particular blood line.

Mr. MacDermot: There is complete exemption for any chattel of value £1,000 or less. Therefore, no liability to Capital Gains Tax would arise in respect of herds in which the individual beasts were of less than that value.
The Clause would allow a person engaged in agriculture or in forestry to transfer assets used in the enterprise to a family partnership of which he is a member for use in agriculture or forestry by that partnership without incurring liability to Capital Gains Tax on that occasion. In form, it follows the provision


for the transfer of business assets in Clause 31 and would lead to a deferment of rather than an exemption from liability to Capital Gains Tax. As drafted, it would, incidentally, allow forestry assets to be replaced by assets for farming and vice versa.
This gives me an opportunity to correct a slip which I made in Committee, and about which I have written to the hon. Member for Cornwall, North (Mr. Scott-Hopkins). It is not possible to use the transfer of business assets provision in Clause 31 on the transfer of assets from agriculture to forestry, but it is within the many branches of agriculture. I was wrong in saying that forestry was for this purpose a branch of agriculture. It is a separate trade.
Although the new Clause is modelled on Clause 31, the circumstances envisaged in it are entirely different from those which gave rise to Clause 31, which deals with a case where old assets used in a trade are sold and the sale proceeds are used to buy new assets for use in the same trade. As has been explained before, the primary concern which led to the Clause was the case of the redeployment of industry, but it extends beyond that and, as I have said, will include the transfer of assets in farming.
6.30 p.m.
The situation envisaged in the new Clause is quite different. There is no requirement that the consideration received by the farmer or the woodland owner on the transfer of the assets of the partnership must be invested in the partnership business. As the Clause is drafted, there would be nothing to prevent him from taking a profit—it might be a handsome one—on the transaction tax free and using the proceeds for his private purposes.
I accept what the right hon. Member for Rushcliffe (Sir M. Redmayne) said in moving the Clause, and in which a number of his hon. Friends have supported him, that what they have in mind is a rather different transaction where a farmer brings his son into business with him and probably no money passes; it is a gratuitous grant to the son of a share in the business. As my hon. Friend the Member for Heywood and Royton (Mr. Barnett) pointed out, this

perhaps, particularly in the farming community, is not a frequent occurrence. Indeed, one hon. Member who spoke in support of the Clause referred to the tendency for farmers to hang on rather long before handing over to their sons or allowing them to participate in the business.
Be that as it may, the Clause goes much wider and could be used as a means for extracting capital gains from a business tax free and in that way making a considerable inroad into the Capital Gains Tax. To look at it another way, it is indirectly a Clause which would push back in time the retirement exemption which the House passed and accepted yesterday, because it would enable persons in partnership, by bringing in a new partner, to realise a gain, defer the liability for tax and then, when the time came for retirement, to use that retirement exemption to extinguish the liability completely and the revenue would be lost for all time. So that what was intended to be a retirement exemption to provide for retirement could be anticipated for other purposes.
These factors show, and are an excellent illustration of, an idea, which is put forward with admirable motives and in a reasonable and persuasive way, directed to a limited point but which, if accepted, would be bound to lead to a much wider application of the principle and to open up a big gap in the whole basis of the tax. For these reasons, I cannot, on behalf of the Government, accept the Clause.
A small incidental point is that the Clause is also open to the objection that it is confined solely to farming and forestry. I appreciate that hon. Members who have put forward the Clause have a particular concern and interest in farming and forestry, for which they fight assiduously in our debates. If, however, it were right in principle to accept the Clause, it would not be right to confine it to farming and forestry. We know that there are special exemptions and privileges for farming and forestry in our tax law, but I do not think that this is one which could be sustained or justified and it would be necessary, if it were accepted, to extend it over the whole range of trade and business.
The right hon. Member for Rushcliffe pointed out that in a case where a farmer


takes his son into partnership, if a liability for Capital Gains Tax arises there might be difficulty through lack of funds in paying the tax. This is a similar problem to one which may arise on payment of Estate Duty on death. Just as the Inland Revenue, in practice, adopts a reasonable approach to the difficulties in these circumstances and will allow the Estate Duty to be paid over a number of years when the difficulty has been established to the satisfaction of the Revenue, I assure the House that it is the intention to apply the same fair administration to the kind of circumstance to which the right hon. Member referred.
That is to say, if a son were taken into partnership and there was a lack of funds in the business at that time to pay the whole of the tax at once, it could be spread over a period of time, which might be a number of years, before it is paid.

Sir Charles Mott-Radclyffe: I was a little surprised to hear the Financial Secretary tell the House that he had quite inadvertently misled the Committee about the difference between agriculture and forestry. If I understood the hon. and learned Gentleman aright, he now states that his previous interpretation was inadvertently in error and that agriculture and forestry are separate businesses. In other words, on the transfer of business assets, if an asset which has been invested in agriculture is reinvested in forestry, there is no benefit under Clause 31.
That is a serious statement and it is a completely new departure, because hitherto agriculture and forestry have always been run together. An employee in forestry comes under the Agricultural Wages Act in exactly the same way as an employee in agriculture. The two are exactly the same.

Mr. MacDermot: It is not a new point. It is purely applying the existing law. For the purposes of tax law, they are different trades now. As I pointed out in debate in Committee, agriculture has a great advantage over many trades in that it is an extremely widely defined trade and includes many different kinds of agriculture—arable, dairy and pig farming, for example; they are all considered as one trade. My slip was in suggesting that it extended to include forestry. I dealt with the matter three

times. I stated it correctly twice and incorrectly once.

Sir C. Mott-Radclyffe: We need to get this clear. The hon. and learned Gentleman now says that if a farm is sold and the owner invests the proceeds in the purchase of woodlands, although the men who erect and repair the fences on the farm are exactly the same men who will erect and repair the fences on the newly-purchased woodland, that is a completely different type of business activity. This is difficult to understand. In terms of any agricultural estate, which always comprises both farming and forestry, this definition is extremely difficult.

Mr. MacDermot: May I try to help the hon. Member again? Where woodlands form part of a farm holding, they may then come within the definition of trade of agriculture. Where, however, a person switches from farming to forestry as a different trade, Clause 31 does not apply.

Sir C. Mott-Radclyffe: I do not think that we are at cross-purposes. The point which I am trying to make concerns an individual who is engaged on one estate in both agriculture and forestry and has been for many years. If he switches a portion of his hitherto agricultural assets into a new forestry venture, although he is already an owner of woodlands commercially managed, what is his position under the Capital Gains Tax Clauses?

Mr. MacDermot: It must be a matter of degree. If his woodland activities are incidental to his farm, they come within the same trade, namely, agriculture. If he has been carrying on two different trades, one agriculture and the other forestry, he cannot switch between them and enjoy the benefit of Clause 31.

Mr. Scott-Hopkins: I am sorry to have to follow the Financial Secretary after he has given a rather unsatisfactory answer. I am grateful to him for writing to me and drawing my attention to the mistake he made during the Committee stage. We have an Amendment on the Order Paper to Clause 31, for discussion later on, and we shall then be able to consider these questions. I hope that we shall find the Government in a more co-operative mood than they have been for the last hour or so. My hon. Friend


the Member for Windsor (Sir C. Mott-Radclyffe) will be able to deploy his arguments, which have a great deal of force.
I am grateful to the hon. and learned Gentleman for the concession he gave at the end of his speech, when he said that if the tax should bear hardly on the farmer who put his son into partnership and had to pay Capital Gains Tax on the realisation, he would be able to spread the payment over a number of years. But that is not sufficient. The fact remains that this tax will take capital out of the farm.
The hon. Member for Heywood and Royton (Mr. Barnett) seemed to think that my right hon. Friend the Member for Rushcliffe (Sir M. Redmayne) was dealing only with small farmers, but we are referring to farmers in general. The hon. Gentleman is experienced in accountancy, but I doubt whether he is as experienced in agriculture. As my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill) pointed out, this tax can bear hardly on the medium-sized farmers as well—indeed, on the large bulk of farmers We need not go into detail about the size of farms. But where the farmer takes his son or a relation into partnership the tax will mean considerable capital outflow. We believe that farming is in a special position in this respect.
My hon. Friend the Member for Norfolk, South also raised the question of the herd basis. The hon. and learned Gentleman said that there would be only rare cases in which an animal worth over £1,000 would be sold. There may be only a few animals in herds where farmers have elected to go on to the herd basis, but the point raised by my hon. Friend concerning a son going into partnership with his father in such cases is very pertinent and we must be clear about this. It appears that the contractual agreement between the Government and farmers

who opted for the herd basis in 1947–48 is being broken by applying Capital Gains Tax on beasts valued at over £1,000 on disposal. We shall return to this matter later, when I am sure that my hon. Friend will once again raise powerful arguments.

The Financial Secretary's main criticism was that, as drafted, the Clause would go too wide and that there might be a question of escaping tax, with the sum realised being used for other purposes when someone is brought into partnership. That is not our intention. We intend that when a father and son partnership takes place the money involved should be reinvested in the farm. If our wording goes too far, the hon. and learned Gentleman should consider withdrawing the Bill and recommitting it so that we could include such a provision.

I understand that the hon. and learned Gentleman accepts the narrow point we are trying to bring about—that Capital Gains Tax should not apply when a father wishes to bring his son into his farming business as a partner in that narrow sense only, where only a paper transaction is involved, or even in the wider sense, where assets have been realised but reinvested. That is all we are trying to do.

I understand that the hon. and learned Gentleman is sympathetic to that case. If that is so, I ask him to consider whether he cannot find a means of remodelling this provision for inclusion in the Bill. I do not believe we should leave this matter where it is. It is very important, particularly for the farming community. Unless he can give such an assurance, I shall have to ask my right hon. and hon. Friends to divide against the Clause.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 269, Noes 271.

Division No. 234.]
AYES
[6.47 p.m.


Agnew, Commander Sir Peter
Atkins, Humphrey
Bell, Ronald


Alison, Michael (Barkston Ash)
Awdry, Daniel
Bennett, Sir Frederic (Torquay)


Allan, Robert (Paddington, S.)
Baker, W. H. K.
Berkeley, Humphry


Allason, James (Hemel Hempstead)
Balniel, Lord
Berry, Hn. Anthony


Amery, Rt. Hon. Julian
Barber, Rt. Hn. Anthony
Biggs-Davison, John


Anstruther-Gray, Rt. Hn. Sir W.
Barlow, Sir John
Birch, Rt. Hn. Nigel


Astor, John
Batsford, Brian
Black, Sir Cyril




Blaker, Peter
Hamilton, M. (Salisbury)
Noble, Rt. Hn. Michael


Bossom, Hn. Clive
Harris, Frederic (Croydon, N. W.)
Nugent, Rt. Hn. Sir Richard


Bowen, Roderic (Cardigan)
Harris, Reader (Heston)
Onslow, Cranley


Box, Donald
Harrison, Brian (Maldon)
Orr, Capt. L. P. S.


Boyd-Carpenter, Rt. Hn. J.
Harvey, Sir Arthur Vere (Macclesf'd)
Orr-Ewing, Sir Ian


Braine, Bernard
Harvey, John (Walthamstow, E.)
Osborn, John (Hallam)


Brewis, John
Harvie Anderson, Miss
Osborne, Sir Cyril (Louth)


Brinton, Sir Tatton
Hastings, Stephen
Page, John (Harrow, W.)


Bromley-Davenport, Lt.-Col. Sir Walter
Hawkins, Paul
Page, R. Graham (Crosby)


Brooke, Rt. Hn. Henry
Hay, John
Pearson, Sir Frank (Clitheroe)


Brown, Sir Edward (Bath)
Heald, Rt. Hn. Sir Lionel
Peel, John


Bruce-Gardyne, J.
Heath, Rt. Hn. Edward
Percival, Ian


Bryan, Paul
Hendry, Forbes
Peyton, John


Buchanan-Smith, Alick
Higgins, Terence L.
Pickthorn, Rt. Hn. Sir Kenneth


Bullus, Sir Eric
Hill, J. E. B. (S. Norfolk)
Pike, Miss Mervyn


Burden, F. A.
Hirst, Geoffrey
Pitt, Dame Edith


Butcher, Sir Herbert
Hobson, Rt. Hn. Sir John
Pounder, Rafton


Buxton, Ronald
Hooson, H. E.
Powell, Rt. Hn. J. Enoch


Campbell, Gordon
Hopkins, Alan
Price, David (Eastleigh)


Carlisle, Mark
Hordern, Peter
Prior, J. M. L.


Carr, Rt. Hn. Robert
Hornby, Richard
Quennell, Miss J. M.


Cary, Sir Robert
Hornsby-Smith, Rt. Hn. Dame P.
Ramsden, Rt. Hn. James


Channon, H. P. G.
Hutchison, Michael Clark
Redmayne, Rt. Hn. Sir Martin


Chataway, Christopher
Iremonger, T. L.
Rees-Davies, W. R.


Chichester-Clark, R.
Irvine, Bryant Godman (Rye)
Renton, Rt. Hn. Sir David


Clark, Henry (Antrim, N.)
Jenkin, Patrick (Woodford)
Ridley, Hn. Nicholas


Clark, William (Nottingham, S.)
Jennings, J. C.
Ridsdale, Julian


Clarke, Brig. Terence (Portsmth, W.)
Johnson Smith, G. (East Grinstead)
Roberts, Sir Peter (Heeley)


Cole, Norman
Johnston, Russell (Inverness)
Rodgers, Sir John (Sevenoaks)


Cooke, Robert
Jones, Arthur (Northants, S.)
Roots, William


Cooper, A. E.
Jopling, Michael
Sandys, Rt. Hn. D.


Cooper-Key, Sir Neill
Joseph, Rt. Hn. Sir Keith
Scott-Hopkins, James


Corfield, F. V.
Kaberry, Sir Donald
Sharples, Richard


Costain, A. P.
Kerby, Capt. Henry
Shepherd, William


Courtney, Cdr. Anthony
Kerr, Sir Hamilton (Cambridge)
Sinclair, Sir George


Craddock, Sir Beresford (Spelthorne)
Kershaw, Anthony
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Crawley, Aidan
Kilfedder, James A.
Smyth, Rt. Hn. Brig. Sir John


Crosthwaite-Eyre, Col. Sir Oliver
Kimball, Marcus
Spearman, Sir Alexander


Cunningham, Sir Knox
King, Evelyn (Dorset, S.)
Speir, Sir Rupert


Curran, Charles
Kirk, Peter
Stainton, Keith


Currie, G. B. H.
Kitson, Timothy
Stanley, Hn. Richard


Dalkeith, Earl of
Lagden, Godfrey
Steel, David (Roxburgh)


Dance, James
Lambton, Viscount
Studholme, Sir Henry


Davies, Dr. Wyndham (Perry Barr)
Lancaster, Col. C. G.
Talbot, John E.


d'Avigdor-Goldsmid, Sir Henry
Langford-Holt, Sir John
Taylor, Sir Charles (Eastbourne)


Dean, Paul
Legge-Bourke, Sir Harry
Taylor, Edward M. (G'gow, Cathcart)


Digby, Simon Wingfield
Lewis, Kenneth (Rutland)
Teeling, Sir William


Dodds-Parker, Douglas
Litchfield, Capt. John
Temple, John M.


Doughty, Charles
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Thatcher, Mrs. Margaret


Drayson, G. B.
Lloyd, Rt. Hn. Selwyn (Wirral)
Thomas, Sir Leslie (Canterbury)


du Cann, Rt. Hn. Edward
Longden, Gilbert
Thompson, Sir Richard (Croydon, S.)


Eden, Sir John
Loveys, Walter H.
Thorpe, Jeremy


Elliot, Capt. Walter (Carshalton)
Lubbock, Eric
Tiley, Arthur (Bradford, W.)


Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Lucas, Sir Jocelyn
Tilney, John (Wavertree)


Emery, Peter
McAdden, Sir Stephen
Turton, Rt. Hn. R. H.


Eyre, Reginald
MacArthur, Ian
Tweedsmuir, Lady


Farr, John
Mackenzie, Alasdair (Ross &amp; Crom'ty)
van Straubenzee, W. R.


Fell, Anthony
Mackie, George Y. (C'ness &amp; S'land)
Vaughan-Morgan, Rt. Hn. Sir John


Fisher, Nigel
Maclean, Sir Fitzroy
Vickers, Dame Joan


Fletcher-Cooke, Charles (Darwen)
Macleod, Rt. Hn. Iain
Walder, David (High Peak)


Fletcher-Cooke, Sir John (S'pton)
McMaster, Stanley
Walker, Peter (Worcester)


Foster, Sir John




Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
McNair-Wilson, Patrick
Walker-Smith, Rt. Hn. Sir Derek


Fraser, Ian (Plymouth, Sutton)
Maginnis, John E.
Wall, Patrick


Gammans, Lady
Maitland, Sir John
Walters, Dennis


Gibson-Watt, David
Marples, Rt. Hn. Ernest
Ward, Dame Irene


Giles, Rear-Admiral Morgan
Marten, Neil
Weatherill, Bernard


Gilmour, Ian (Norfolk, Central)
Mathew, Robert
Webster, David


Gilmour, Sir John (East Fife)
Maude, Angus
Wells, John (Maidstone)


Glover, Sir Douglas
Maudling, Rt. Hn. Reginald
Whitelaw, William


Glyn, Sir Richard
Maxwell-Hyslop, R. J.
Williams, Sir Rolf Dudley (Exeter)


Godber, Rt. Hn. J. B.
Maydon, Lt.-Cmdr. S. L. C.
Wills, Sir Gerald (Bridgwater)


Goodhart, Philip
Meyer, Sir Anthony
Wilson, Geoffrey (Truro)


Goodhew, Victor
Mills, Peter (Torrington)
Wise, A. R.


Gower, Raymond
Mills, Stratton (Belfast, N.)
Wolrige-Gordon, Patrick


Grant, Anthony
Miscampbell, Norman
Wood, Rt. Hn. Richard


Grant-Ferris, R.
Mitchell, David
Woodhouse, Hn. Christopher


Gresham Cooke, R.
Monro, Hector
Woodnutt, Mark


Griffiths, Eldon (Bury St. Edmunds)
More, Jasper
Wylie, N. R.


Griffiths, Peter (Smethwick)
Morrison, Charles (Devizes)
Yates, William (The Wrekin)


Grimond, Rt. Hn. J.
Mott-Radclyffe, Sir Charles
Younger, Hn. George


Gurden, Harold
Munro-Lucas-Tooth, Sir Hugh



Hall, John (Wycombe)
Murton, Oscar
TELLERS FOR THE AYES:


Hall-Davis, A. G. F.
Neave, Airey
Mr. McLaren and Mr. Pym.


Hamilton, Marquess of (Fermanagh)









NOES


Abse, Leo
Griffiths, Will (M'chester, Exchange)
Molloy, William


Albu, Austen
Gunter, Rt. Hn. R. J.
Monslow, Walter


Allaun, Frank (Salford, E.)
Hale, Leslie
Morris, Charles (Openshaw)


Alldritt, Walter
Hamilton, James (Bothwell)
Morris, John (Aberavon)


Atkinson, Norman
Hamilton, William (West Fife)
Mulley, Rt. Hn. Frederick (Sheffield Pk)


Bacon, Miss Alice
Hamling, William (Woolwich, W.)
Murray, Albert


Bagier, Gordon A. T.
Hannan, William
Neal, Harold


Barnett, Joel
Harper, Joseph
Newens, Stan


Baxter, William
Harrison, Walter (Wakefield)
Noel-Baker, Francis (Swindon)


Bence, Cyril
Hart, Mrs. Judith
Noel-Baker, Rt. Hn. Philip (Derby, S.)


Bennett, J. (Glasgow, Bridgeton)
Hazell, Bert
Norwood, Christopher


Binns, John
Heffer, Eric S.
Oakes, Gordon


Bishop, E. S.
Henderson, Rt. Hn. Arthur
Ogden, Eric


Blackburn, F.
Herbison, Rt. Hn. Margaret
O'Malley, Brian


Blenkinsop, Arthur
Hobden, Dennis (Brighton, K'town)
Oram, Albert E. (E. Ham, S.)


Boardman, H.
Holman, Percy
Orbach, Maurice


Boston, T. G.
Horner, John
Orme, Stanley


Bottomley, Rt. Hn. Arthur
Houghton, Rt. Hn. Douglas
Oswald, Thomas


Bowden, Rt. Hn. H. W. (Leics S. W.)
Howarth, Harry (Wellingborough)
Owen, Will


Braddock, Mrs. E. M.
Howarth, Robert L. (Bolton, E.)
Padley, Walter


Bradley, Tom
Howell, Denis (Small Heath)
Page, Derek (King's Lynn)


Bray, Dr. Jeremy
Howie, W.
Paget, R. T.


Brown, Rt. Hn. George (Belper)
Hoy, James
Pannell, Rt. Hn. Charles


Brown, Hugh D. (Glasgow, Provan)
Hughes, Cledwyn (Anglesey)
Pargiter, G. A.


Buchan, Norman (Renfrewshire, W.)
Hughes, Emrys (S. Ayrshire)
Park, Trevor (Derbyshire, S. E.)


Buchanan, Richard
Hughes, Hector (Aberdeen, N.)
Parker, John


Butler, Herbert (Hackney, C.)
Hunter, Adam (Dunfermline)
Parkin, B. T.


Butler, Mrs. Joyce (Wood Green)
Hunter, A. E. (Feltham)
Pavitt, Laurence


Callaghan, Rt. Hn. James
Hynd, H. (Accrington)
Pearson, Arthur (Pontypridd)


Carmichael, Neil
Irving, Sydney (Dartford)
Pentland, Norman


Chapman, Donald
Jackson, Colin
Perry, Ernest G.


Coleman, Donald
Janner, Sir Barnett
Popplewell, Ernest


Conlan, Bernard
Jay, Rt. Hn. Douglas
Prentice, R. E.


Corbet, Mrs. Freda
Jeger, George (Goole)
Price, J. T. (Westhoughton)


Cousins, Rt. Hn. Frank
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Probert, Arthur


Craddock, George (Bradford, S.)
Jenkins, Hugh (Putney)
Pursey, Cmdr. Harry


Crawshaw, Richard
Jenkins, Rt. Hn. Roy (Stechford)
Randall, Harry


Crosland, Rt. Hn. Anthony
Johnson, Carol (Lewisham, S.)
Rankin, John


Crossman, Rt. Hn. R. H. S.
Johnson, James (K'ston-on-Hull, W.)
Redhead, Edward


Cullen, Mrs. Alice
Jones, Dan (Burnley)
Rees, Merlyn


Dalyell, Tam
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Rhodes, Geoffrey


Darling, George
Jones, J. Idwal (Wrexham)
Roberts, Albert (Normanton)


Davies, Ifor (Gower)
Jones, T. W. (Merioneth)
Roberts, Goronwy (Caernarvon)


de Freitas, Sir Geoffrey
Kelley, Richard
Robertson, John (Paisley)


Delargy, Hugh
Kenyon, Clifford
Robinson, Rt. Hn. K. (St. Pancras, N.)


Dell, Edmund
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Rodgers, William (Stockton)


Dempsey, James
Kerr, Dr. David (W'worth, Central)
Rose, Paul B.


Diamond, Rt. Hn. John
Lawson, George
Ross, Rt. Hn. William


Dodds, Norman
Leadbitter, Ted
Rowland, Christopher


Doig, Peter
Ledger, Ron
Sheldon, Robert


Driberg, Tom
Lee, Miss Jennie (Cannock)
Shinwell, Rt. Hn. E.


Duffy, Dr. A. E. P.
Lever, Harold (Cheetham)
Shore, Peter (Stepney)


Dunn, James A.
Lever, L. M. (Ardwick)
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)


Dunnett, Jack
Lewis, Arthur (West Ham, N.)
Short, Mrs. Renée (W'hampton, N. E.)


Edelman, Maurice
Lewis, Ron (Carlisle)
Silkin, John (Deptford)


Edwards, Robert (Bilston)
Lipton, Marcus
Silkin, S. C. (Camberwell, Dulwich)


English, Michael
Loughlin, Charles
Silverman, Julius (Aston)


Ennals, David
Mabon, Dr. J. Dickson
Silverman, Sydney (Nelson)


Ensor, David
McBride, Neil
Skeffington, Arthur


Evans, Albert (Islington, S. W.)




Evans, Ioan (Birmingham, Yardley)
McCann, J.
Small, William


Fernyhough, E.
MacColl, James
Snow, Julian


Finch, Harold (Bedwellty)
MacDermot, Niall
Soskice, Rt. Hn. Sir Frank


Fitch, Alan (Wigan)
McGuire, Michael
Steele, Thomas (Dunbartonshire, W.)


Fletcher, Ted (Darlington)
McInnes, James
Stewart, Rt. Hn. Michael


Fletcher, Raymond (Ilkeston)
McKay, Mrs. Margaret
Stonehouse, John


Floud, Bernard
Mackenzie, Gregor (Rutherglen)
Stones, William


Foley, Maurice
McLeavy, Frank
Strauss, Rt. Hn. G. R. (Vauxhall)


Foot, Sir Dingle (Ipswich)
Mahon, Peter (Preston, S.)
Stross, Sir Barnett (Stoke-on-Trent, C.)


Foot, Michael (Ebbw Vale)
Mahon, Simon (Bootle)
Summerskill, Hn. Dr. Shirley


Ford, Ben
Mallalieu, J. P. W. (Huddersfield, E.)
Swain, Thomas


Fraser, Rt. Hn. Tom (Hamilton)
Manuel, Archie
Swingler, Stephen


Freeson, Reginald
Mapp, Charles
Symonds, J. B.


Galpern, Sir Myer
Marsh, Richard
Taverne, Dick


Garrett, W. E.
Mason, Roy
Taylor, Bernard (Mansfield)


George, Lady Megan Lloyd
Maxwell, Robert
Thomas, George (Cardiff, W.)


Ginsburg, David
Mayhew, Christopher
Thomas, Iorwerth (Rhondda, W.)


Gourlay, Harry
Mellish, Robert
Thomson, George (Dundee, E.)


Greenwood, Rt. Hn. Anthony
Mendelson, J. J.
Thornton, Ernest


Gregory, Arnold
Mikardo, Ian
Tinn, James


Grey, Charles
Millan, Bruce
Tomney, Frank


Griffiths, David (Rother Valley)
Miller, Dr. M. S.
Tuck, Raphael


Griffiths, Rt. Hn. James (Llanelly)
Milne, Edward (Blyth)
Urwin, T. W.







Varley, Eric G.
Whitlock, William
Winterbottom, R. E.


Walden, Brian (All Saints)
Wigg, Rt. Hn. George
Woodburn, Rt. Hn. A.


Walker, Harold (Doncaster)
Wilkins, W. A.
Woof, Robert


Wallace, George
Willey, Rt. Hn. Frederick
Wyatt, Woodrow


Warbey, William
Williams, Alan (Swansea, W.)
Yates, Victor (Ladywood)


Watkins, Tudor
Williams, Clifford (Abertillery)
Zilliacus, K.


Weitzman, David
Williams, W. T. (Warrington)



Wells, William (Walsall, N.)
Willis, George (Edinburgh, E.)
TELLERS FOR THE NOES:


White, Mrs. Eirene
Wilson, William (Coventry, S.)
Mr. George Rogers and Mrs. Slater.

New Clause.—(STAMP DUTY: HOUSE PURCHASE.)

The Stamp Duty chargeable under Schedule 1 to the Stamp Act 1891 as amended by section 55 of the Finance Act 1963 (Conveyance or Transfer on Sale) shall be charged by reference to the amount or value of the consideration for the sale, provided that the amount so referred to shall not exceed the amount at which the instrument is certified within the meaning of section 34 of the Finance Act 1958 at the following rates, that is to say:

(a) where the amount or value of the consideration is £5,000 or under, nil;
(b) where the amount or value of the consideration is over £5,000 but not exceeding £10,000 at the following rate:

Over £5,000 not exceeding £6,000 1s. per £25
Over £6,000 not exceeding £7,000 2s. per £25
Over £7,000 not exceeding £8,500 3s. per £25
Over £8,500 not exceeding £10,000 4s. per £25

(c) in any other case, the rate specified in column 3 of part 1 of Schedule 11 to the Finance Act 1963.—[Mr. Younger.]

Brought up, and read the First time.

7.0 p.m.

Mr. George Younger: I beg to move, That the Clause be read a Second time.
We have discussed many matters of great importance this afternoon, all of them affecting a large number of people. This Clause affects many more people than any of the others which we have been discussing. Because of the necessity to pay Stamp Duty when purchasing a house it affects well over half the families in the country. I feel that this Clause should command support from both sides of the House, because I shall be surprised if there are any hon. Members who have not, at some time during the past year or so, received some form of representation from their constituents about the general difficulties and expense of house purchase.
I want particularly to draw the attention of the House to Stamp Duty. This duty has no instrinsic or moral merit other than the fact that it raises revenue.

Nobody would argue there is anything particularly good or evil about the tax as such. But there is no argument for it other than that of raising revenue. That is its only purpose. This Clause has two main aims. First, it proposes to raise the lower limit under which no Stamp Duty is payable and secondly it intends to alter the rates of duty, with two objectives. They are first, that the rates should bear rather more lightly on the lower levels, and, secondly, that there should be a more sensible and even graduation between the various rates up to the top rates.
The present rates are, for a house costing less than £4,500, no Stamp Duty at all, between £4,500 and £6,000, 0·5 per cent., and from £6,000 upwards, 1 per cent. The disadvantages of the present rates are these. In the first place, £4,500 for the bottom limit is too low. I presume that there was a time when a house at £4,500 would have been a rather larger or better house than the average. Even supposing that the bottom level of £4,500 was right in 1963, when stamp duty was last amended, it cannot possibly be right today.
Since that time the prices have been going up. In 1963 and 1964 there was a total increase of approximately 5 per cent. in the cost of living. In 1965, up to the present time there has been a 5 per cent. rise—a very much swifter and disastrous one than last year. The total rise between the period when Stamp Duty was last revised and now is about 10 per cent. In this Clause it is proposed to raise the lower limit from £4,500 to £5,000, an increase of £500, which is just over 10 per cent. and is not at all unreasonable, purely on the ground that the cost of living has risen by that amount since the last revision.
In many parts of the country house prices have risen by more than the general rise in the cost of living, but I do not adduce that as an argument for making an even greater rise in the bottom level. It is perfectly reasonable at this stage,


assuming it was correct the last time the duty was revised, to raise the lower limit from £4,500 to £5,000.
The second objective of the Clause deals with the rates of graduation for house purchases above £4,500. There are at present only two divisions, between £4,500 and £6,000, which is the lower rate, and £6,000 and upwards, which is the higher rate. There are many houses today which come between these two brackets. As such a very large number of houses is being bought by people of all income levels, it is too narrow to have only one change in duty. It makes for some rather absurd anomalies in the process.
For instance, if a house is purchased at £6,050, just over the £6,000 rate, stamp duty will be paid at the rate of 1 per cent. on the purchase price, that is, £60 10s. But if the seller is unsuccessful in getting the price up to £6,050, and he has to close at £5,950, then the Stamp Duty payable is under the £6,000 mark, and is only 0·5 per cent., which is £29 15s. Of that extra £100 which is achieved by the seller, if he sells at £6,050, £30 15s. will disappear in increased Stamp Duty.
I fully appreciate that whenever one has differences of rates occurring at certain points, one gets anomalies at those points. I do not suggest that one can cut this out altogether, there is always a point at which new rates start, and a margin on either side which will make a rather different situation, according to whether one is above or below it. My point is that to have only one change in the rate, and to have it so abrupt, between 0·5 per cent. and 1 per cent., is unnecessary and makes for considerable hardship. Those rates could be, and should be, altered with no very great difficulty.
The £6,000 house today is becoming more and more common, particularly in the south-east of England. It is still the case in Scotland, where I come from, that one can buy a house for £4,500 to £5,000, but in the southern part of the country one is very lucky to get a house at that level. Clearly, the £6,000 house, where there is this anomaly, is by no means a rich man's castle or palace. It is an ordinary person's house, and it should, therefore, command sympathy. The Clause graduates the rates much more

fairly. The suggestion is that up to £5,000 there should be no duty at all and that there should be five separate rates above that starting at 0·2 per cent. for £5,000 to £6,000 houses which is substantially lower than the present amount, and going up to the rate of 1 per cent., which is the top rate at the moment, for the £10,000 house.
The graduations are fairly even, rising from 0·2 per cent. to 0·4 per cent., 0·6 per cent., 0·8 per cent. and 1 per cent. One has a very close and reasonably even graduation which will mean the minimum of anomalies. They cannot be cut out altogether, but this will reduce them to the minimum. To take the example of the house selling for £6,050, the rate of Stamp Duty paid under this Clause shows a great improvement. Sold at this price, the Stamp Duty paid would be at the rate of 0·4 per cent., which is £24.
If the house did not make £6,050, and was sold for £5,950, it would attract duty at 0·2 per cent., which is £11 18s. The difference is £12, whereas in the previous example under the present rates, the difference is £30. Leaving aside the question whether it is a lot of money, it is the difference with which I am concerned, and the difference is much less and would cause much less hardship.
So much for the details of the proposed changes. It remains for me to explain why I feel that the Government should be sympathetic to altering the position for house owners, particularly when they have to change their houses frequently. We start from what I think, certainly on the surface, is common ground between the two sides of the House. Home ownership is a desirable thing which both sides want to encourage and which is in the interests of the country to encourage by every means it can. Some of us have our doubts about whether the oft-repeated statements by the Labour Party that it desires home ownership are entirely believed by everybody, but for the purposes of this debate we must take that as being the case. We are therefore agreed that home ownership is desirable.
Secondly, there is no question that the more people who buy or build their own homes, the less cost there is on public funds and the less difficulty is caused in the housing drive which is so important


for people who cannot afford to buy their own homes. For this reason, too, it is thoroughly desirable from every point of view that people should be encouraged to own their homes.
A third point which is not so often mentioned, and which is possibly undervalued, is very important. One of the great difficulties about modernising the country, as we are discovering, is the genuine trouble which people have in changing their jobs if this involves going to another part of the country. It is too easy to sit back and say, "We must close such and such an industry. The people can get jobs elsewhere. There are plenty of jobs in the South-East". But, when we get down to the detail, we often find that the real stumbling block is that people who do not own their own homes cannot easily move from one part of the country to another because they are not on the housing list or there is a housing shortage in the area to which they want to go.
However, it is also often very difficult to move to a different part of the country if one is a home owner. It is often very expensive to move from one place to another. Frequently, people cannot find suitable houses. Again, the more we can encourage people to buy their own homes, the easier it is to persuade those who lose their jobs or become redundant to go to other parts of the country where their labour is very badly needed. This is why I suggest that the Government should do anything, however small, to encourage people to own their own homes.
I have no sympathy for the view that a charge as relatively small as stamp duty has no effect. We must remember that in the current situation, when housing is difficult to obtain and prices are rising, the person who buys a house is almost always extended to the limit of his resources. This is partly inevitable because prices increase. It is partly due to human nature because people, particularly wives, always want to attain the nicest house that they think they can afford. I have pored over documents with many people working out how much they can affard in monthly repayments within their wages or salaries to get the house which they have set their hearts on. We have often reached the point of deciding that it is just possible and no more and then we suddenly remember that in the

initial payment we have to make allowance for Stamp Duty, which can amount to £50 or £60 even on a comparatively ordinary house.
There are other things about which the Government should be sympathetic. Home owners were given a very great "going over" during the General Election. They were given to understand that they would get cheaper mortgages. Many people who had no party affiliations and who had no need to be swayed by party politics, genuinely believed that they would get cheaper mortgages. We all know that they have not got them; they have more expensive mortgages. This is another drain on an overstrained purse. Houses cost more. The price of building them has increased because of many things, one of which is the import surcharge. This is an extra strain on somebody whose resources are already at the limit.
7.15 p.m.
We have been hearing quite a lot recently that cuts in the building programme are taking place. Many big contractors have made rather drastic cuts in their housing programmes in the past few months. This cannot fail to make it more difficult to get houses and to increase the price of those which are available. This is another problem and difficulty which home owners face. We must also remember that, particularly if people have to change house often—and many people, particularly those in industry, have to move around a lot—this is not something which one can do at one's leisure.
Changing house and finding a new one in a new town and finding a new job is not something over which people can take months. They have an existing house which probably must be vacated. Many have wives and families who are left behind and are longing to get to the new house. Often there is a poor choice of house in the place to which they want to go. The houses may be too expensive or too difficult to find and they have to plump for a house for which, in ideal circumstances, they would not have plumped. Any help that we can give to people who own their own homes is of great value.
The factor which no doubt will exercise the Treasury Bench more than any other is cost. The cost of any concession is all too frequently the dominating factor. I


suppose that we should be glad that there is a spirit of good housekeeping in these matters. But the amount of money about which we are talking is not nearly as great as the importance of passing this new Clause. The total revenue from stamp duty is about £86 million a year. The revenue from Stamp Duty on land and property is approximately £21 million a year.
The last time that Stamp Duty on house purchase was altered was in the Finance Act, 1963. According to the figures which I can find in the Inland Revenue Report, there seems to have been a loss in revenue following that of approximately £6 million. It is difficult to ascertain this from the figures, but that is the position as far as I can see. Compared with the benefit that we would give to people who want to own their homes, £6 million, even in the terms in which we are talking, is not such a major factor. It is well within the margin of error between the Budget estimates and the out-turn from Stamp Duty. For that reason alone, I should have thought that the argument that this proposal will cost too much cannot be given as much weight as is generally given in these debates.
Finally, this is a proposal which should command all our sympathy. It is desperately needed by those who have to change house, particularly those who change house often. We listened with interest to members of the Government before, during and after the election saying how much they loved the home-owner. Here is a chance for them to prove it. If they cannot accept the Clause, we can only assume that their love for the home owner is nothing like as strong as they would have us believe.

Mr. Michael Alison: I support my hon. Friend the Member for Ayr (Mr. Younger) and express the earnest hope that the Government will consider the new Clause very sympathetically and put themselves in most excellent company by continuing the tradition started by a succession of Conservative Chancellors of the Exchequer of steadily reducing the rate of Stamp Duty for house purchasers.
The House may remember that it was my right hon. Friend the Member for Barnet (Mr. Maudling) who, in the 1963

Budget, introduced a proposal which resulted in the rate being reduced from 2 per cent. to 1 per cent. Indeed, he went further. On the lower cost houses—that is, those up to a limit of £6,000—he reduced the rate from 2 per cent. to ½ of 1 per cent., which was a very substantial reduction. There are excellent reasons for continuing this downward trend.
Hon. Members may remember that when my right hon. Friend the Member for Barnet introduced his proposals in 1963, one of the strongest grounds for objecting to it by the then Opposition was the benefit that would be bestowed in principle upon those who were exchanging and selling stocks and shares. The point was made concerning stamp duty generally that it was introduced in 1948 by the late Dr. Dalton as a substitute for a capital gains tax, which at that stage it was too difficult to introduce. Objection was made by hon. Members opposite to my right hon. Friend's proposals for capital gains tax reasons. The objection to the reduction of Stamp Duty on those grounds has been wholly swept away by this year's Finance Bill.
In looking up the debates at that time I find that hon. Members opposite had no objection whatever to my right hon. Friend's proposals for reducing Stamp Duty as it applied to houses. I should have thought, therefore, that under the provisions of the Bill there are prima facie grounds for welcoming our proposal to reduce stamp duty in the light of the proposal for a Capital Gains Tax as a substitute for it.
The second obvious reason for reducing stamp duty on house purchase is the staggering increase in the cost of new houses. The official figure given by a member of the Government in a recent Written Answer shows that during the six months' period covering the last quarter of 1964 and the first quarter of this year, the average increase in the price of new houses was no less than 5 per cent. That staggering increase is probably one of the greatest increases ever. When this is taken in conjunction with the increase in mortgage rates, with local authorities being unable to lend at anything less than 7 per cent. and with building societies paying 4 per cent. on money loaned to them to be able to


attract funds, the combination of a 5 per cent. increase in the cost of housing and the phenomenon of unparalleled mortgage rates for housing loans surely means that the time has come to give a fillip to the home buyer.
Evidence of that is to be seen in the rather alarming tendency for housing starts for the first time in many months to show a decline, reflecting the difficulty both of getting mortgages and generally of raising money for house purchase. This is a serious matter. There is no doubt that our proposal is one way in which weight could be thrown on the other side of the scales by not only the practical but also the psychological effect of reducing stamp duty.
My hon. Friend the Member for Ayr (Mr. Younger) referred to the necessity to encourage increased mobility among home owners. I speak with feeling in this context because my constituency has a problem which will become serious. A colossal new Central Electricity Generating Board power station is about to be commenced. It will be the biggest in Europe and it will require 5,000 extra men in the area to build it. Goodness knows where they will be housed. All one knows is that private houses take exactly half as long to complete as local authority houses. If we want a boost in building for home ownership and to increase housing accommodation in a locality quickly, private housing is the way to get it. We want to encourage not only the building of houses but people in other parts of the country to be ready to sell their homes and to move into areas which have acute labour shortages.
For the three reasons which I have given—the staggering increase in the cost of houses to the purchaser, the elimination of the traditional Socialist objection to a reduction in Stamp Duty, since it serves as a form of Capital Gains Tax now that a fully fledged Capital Gains Tax is proposed in the Bill, and the need to increase mobility of labour—I hope that right hon. and hon. Members opposite will seriously consider this proposal.

Mr. MacDermot: Arguments in favour of the new Clause have been fully deployed by the hon. Member for Ayr (Mr. Younger) and already the debate is showing a tendency to spread into a

general debate on housing, a subject which has been debated fully by the House on a number of recent occasions. Perhaps, therefore, it would be helpful if I stated the Government's position about the new Clause. I could answer it extremely shortly in the three words, "Not this year".
Of course, we have sympathy for the motives underlying the new Clause, but this is a year in which, as a result of the economic situation which we have inherited, my right hon. Friend the Chancellor has found it necessary—[Interruption.] Hon. Members opposite do not like to be reminded, when they are indulging in their airy-fairy dreams of how to give away money from the revenue, that they have left us a situation which required, as they have been forced to concede, the imposition of substantial additional taxation. In that situation they must not object too vociferously if I remind them of the realities of the Budget and its strategy.
Hon. Members opposite propose to make a reduction in Stamp Duty for house purchase. If it were confined solely to Stamp Duty for house purchase, as the title of the new Clause suggests, the cost would be £4 million this year and £6 million in a full year. I am advised that the wording of the Clause is rather wide and might be interpreted to include all Stamp Duty, including that on stocks and shares, in which event the cost would be much greater at £25 million this year and £38 million the following year. From what the hon. Member for Ayr said in moving the new Clause, however, I gather that that is not the intention. In any event, a concession of this order would not he possible.
I should like to say a few words more in deference to the way in which the matter has been argued. The present limit and the reduction of the duty from 2 to 1 per cent. was made as recently as 1963 in the Budget of the right hon. Member for Barnet (Mr. Maudling), which, I think, was widely recognised to have been intended as a pre-election Budget. The election, it will be remembered, was deferred, but that was the Budget in which that concession was granted.

Mr. Edward Heath: Is not the hon. and learned Gentleman out of date with his year?

Mr. MacDermot: I am not out of date. The election was 1964. The Budget to which I am referring—1963—was intended to be a pre-election Budget. [Laughter.] Hon. Members opposite have, perhaps, forgotten the circumstances which led to the last General Election not being held until the twelfth hour of their term of office.

Mr. Frederic Harris: Is this one meant to be a pre-election Budget?

Mr. MacDermot: The figures published by the Milner Holland Committee and also, recently, by the Co-operative Building Society show that the average prices of homes in most parts of the country are well below the present £4,500 exemption limit. Even in London and the South-East, where prices are higher, the average prices arestill below the limit of the 1 per cent. rate. I remind the House that for a house at the top end of that intermediate rate—a £6,000 house—the amount of duty payable is £30. This, when viewed against the costs of house purchasing, which we would all agree are high—perhaps too high—is a relatively small element when compared with the legal charges, estates agents' fees, and so on, which are incurred at the time of house purchase.
7.30 p.m.
However, that is not the reason why I must advise the House that we must reject the new Clause. It is simply a matter of whether this is a concession which we can afford and can concede this year, and the answer is that we cannot. It is not that we have any prejudice against house purchase. Indeed, my right hon. Friend the Chancellor has shown his sympathy and understanding for house purchase and the need to encourage it by granting an exemption from Capital Gains Tax which is quite unparalleled in any other Capital Gains Tax; it is far beyond the exemption for home ownership under the American tax, where the extent of the concession is limited to the gain which is reinvested in the purchase of another house. Hon. Members cannot suggest as part of their arguments that there is any kind of prejudice involved in the rejection of the Clause.
The simple matter is whether the problems of the house purchaser can be afforded such priority that a concession

of this order can be made now. We have debated recently the very interesting Milner Holland Report, which showed that as far as taxation benefits go the house purchaser is perhaps the one who has least to complain about. There are already very valuable concessions for the house purchaser, and it will be remembered that the Milner Holland Report stressed particularly the effects of taxation upon rented housing.
In making these remarks I am being tempted to stray into the wider field, and I suggest that the simple issue before the House is whether or not we can make such a concession this year. The answer is that I am afraid we cannot.

Mr. Graham Page: I had hoped that the Government would find it possible to be more sympathetic towards the new Clause than the hon. and learned Gentleman has shown them to be. I ought to declare an interest as a practising solicitor, because Stamp Duty always goes on the solicitor's bill. Clients have the idea that solicitors get it and not the Government, and time and again they have to be told that it is the Chancellor who is getting the money and not their solicitors.
I have always wondered why it is the purchaser who has to pay duty. He is being taxed for paying money rather than receiving it. There is no consistency about this, because when he gets a mortgage, he pays for receiving money as well. Perhaps the idea might be thrown out that we should move the tax on to the vendor rather than the purchaser, because the present system is not consonant with the good principle of the capacity to pay.
I do not put the case for the new Clause as high as saying that stamp duty prevents anyone purchasing a property, but it comes at a time when he has to meet such heavy expenses as the deposit, if he is seeking an advance by way of mortgage. He has to pay for the furnishing of the house, and he has to pay removal costs. If he is a wise purchaser, he has to pay survey fees. Then there are alterations and decorations to the house, legal costs, and Land Registry fees. The Government want to encourage land registration, I understand, so more and more will be paying not only stamp duty but Land Registry fees. All these expenses come at the same time, and


stamp duty on conveyances is like rubbing salt into an open wound.
The second point my hon. Friend made in moving the new Clause was the extreme jump of 1 per cent. for the £6,000 purchase. Whether or not the hon. and learned Gentleman can accept a reduction in duty, I cannot see how he can refuse a system of graduation now that it has been called to the attention of the House. The application of Stamp Duty without a graduation is something unknown in other duties and taxes. We have graduation in almost every other field, as the full tax falls. But here there is this sudden jump, and my hon. Friend has put forward a system for graduating Stamp Duty in a very reasonable way. If the Government cannot accept a reduction of some £6 million in revenue during a year, surely they can give very serious attention to the graduation of the duty.
It is no argument to say that the average price of houses is below the figure at which stamp duty starts. If the average is below, then there are a good many houses purchased above that figure. That is an obvious statement to make, because if one takes an average, there are obviously many above the average and many people who are hit by Stamp Duty, and there should no longer be a penalty on the purchase of an ordinary home.

Mr. Heath: My hon. Friend the Member for Ayr (Mr. Younger), moving the new Clause in a lucid and persuasive speech, set out the reasons why it should be accepted by the Government. It is a perfectly logical conclusion of the policies followed by successive Tory Governments from 1951 onwards, and the object is to make it easier for people to buy their homes and to encourage a property-owning democracy. In 1952, the Stamp Duty was reduced to 1 per cent. and 1½ per cent. respectively for houses in the price range of £1,500-£3,000 and £3,000-£4,550. That was the first stage. The second stage was in 1956 and 1958, when the duty was abolished on houses costing up to £3,500 and reduced on houses up to £6,000. Then, in 1963, the occasion to which the Financial Secretary has called attention—apparently having been in a state of continous excitement about a possible election—the duty was abolished on houses up to £4,500.

So to move it now to £5,000 is a logical continuation.
There are a number of arguments in favour of doing this, of some of which I should like to remind the House. On the question of the average prices, I differ from the Financial Secretary to the Treasury. The information I have is that in London and the South-East the average price for existing houses and for new houses in the last quarter of 1964 is already above £4,500. My information is that for existing houses it is £4,743, and for new houses it is £4,867.

Mr. MacDermot: That accords with what I said. I said that in London and the South-East it is well below the £6,000 mark.

Mr. Heath: We are raising the limit from £4,500 to £5,000, and that is why we have taken the average price of a house.

Mr. MacDermot: The right hon. Gentleman was suggesting that his information differed from mine, whereas it tallies with it.

Mr. Heath: Apparently I misunderstood the point the hon. and learned Gentleman was trying to make from it. Therefore, we are agreed that in London and the South-East, an area containing nearly 20 million people, the figures are already above the present limit of exemption. That seems a powerful argument for raising the limit to £5,000.
A second argument is that £5,000 is the limit fixed by the Greater London Council for granting mortgages. This seems to be the decision of a Labour authority of what the level should be up to which special help should be granted, and it reinforces my hon. Friend's argument that £5,000 should be the figure at which action ought to be taken.
The main reason for doing it is to encourage people to buy their own houses. Although it may not seem a considerable sum when taken in the context of buying a house, the point has been made already that this is a considerable proportion of the initial payments one has to make when buying a house. This is its real importance, and the real argument for reducing it.
My hon. Friend has drawn attention to the sudden jump over £6,000, but there is also a very sudden jump over £4,500. If a person buys a house for £4,450, instead of being exempt, he is immediately required to pay £22 15s. in this tax. This seems to be unjustifiable, and, on looking at the whole situation, it is difficult to understand why the graduated process has not been introduced earlier. I think it is due to the fact that we concentrated on moving the upper limit, but I suggest to the House that the time has come when, in addition to moving the upper limit to £5,000, the general approach to the tax ought to be a graduated one. If a person buys a house costing just under £6,000, he pays £30 by way of tax, but if the house costs just over £6,000, he pay £60 under the present arrangement. This, therefore, is why my hon. Friend's Clause covers both the maximum limit which it is justifiable to raise by £500, and also graduation between the amounts which are shown here.
What did the hon. and learned Gentleman say in reply? He started by saying that he would like to do it, but not this year. The country is getting used to this sort of thing from the present Administration. We had it at the time of the General Election, when innumerable promises were made by the party opposite. In particular, they promised to help house-owners, but now we are told, "Not this year".
The hon. and learned Gentleman then put forward all the detailed arguments set out in his Treasury brief as to why it was not justified to make this change. In kindness to the hon. and learned Gentleman we will overlook that bit and deal only with his statement that he wants to do it, but not this year. He then said that the reason for not doing it was the state of our national finances. The hon. and learned Gentleman complained about my hon. Friend widening the debate, but he has widened this into a debate on the whole economic situation, the disastrous record of the present Administration, the crisis of confidence, and everything else that is responsible for the situation in which the Government find themselves.
The hon. and learned Gentleman said that he wanted to remind the House of realities. Standing there, he is a continuous reminder of the realities of the

Budget. This is a reasonable Clause, and its acceptance will cost only £4 million this year, and £6 million in a full year. It will encourage house ownership, and help those who are about to buy their houses. Can the hon. and learned Gentleman bring himself to accept it? Not on your life. The hon. and learned Gentleman says that he is not prejudiced, but what proof does he produce? He says that the Government whacked an enormous Capital Gains Tax on property and then, under pressure from the Opposition, they made exemptions which affect house-owners, and this is, therefore, a great concession to a property-owning democracy. The idea seems to be, "First you damage people, and then when you stop hitting them you say, 'Look how good we are. We are trying to encourage you all the time'".
We hear the same sort of thing from the Chief Secretary, who says that he wants to encourage saving, but then he does his utmost to prevent it. The Financial Secretary says that he wants to encourage house ownership. The opportunity to do so has been offered to him on a plate, and he has refused to accept it. This shows that the Government are not prepared to do anything to help those who want to buy their own homes or to encourage a property-owning democracy. The Government are concerned only with encouraging local authorities to build houses, and persuading as many people as they can to go into them.
For these reasons, I believe that the Clause is fundamentally sound, and I congratulate my hon. Friend on puttting it before the House. If the Financial Secretary is still recalcitrant, as he has been so often in the past, I suggest to my hon. Friend that, in the interests of the people who want to buy their houses, he should force this matter to a Division.

Mr. Gregor Mackenzie: I apologise for intervening at this late stage of the discussion. I attempted to do so earlier, but, unfortunately, due no doubt to my position in the Chamber, I was not seen by the Chair.
I hope that my hon. and learned Friend the Financial Secretary will think not of the Clause, but of some of the anomalies which have been created by the imposition of stamp duty. The hon. Member


for Ayr (Mr. Younger) dealt with the problems of home ownership. I am sure that both sides of the House want to encourage home ownership, but when we talk about it we must consider not only the cost of the house. We must remember that buying a house involves not only paying the cost of it, but paying in addition what in my part of the country is a very heavy burden on the new owner, the cost of conveyancing, solicitors' charges, and feu duties. These account for a perceptible part of the purchase price, and Stamp Duty is an added irksome charge.
I was disappointed that the hon. Member for Ayr, when stressing the cost of houses in Scotland, did not deal with the factor which has really increased the cost of houses. I am referring to the high cost of land, particularly in the west of Scotland which is entirely due to the Town and Country Planning Acts of the last 10 years. The increase in the cost of labour and materials over the past seven months is not new. We have been faced with a similar situation for more than a decade, and it seems strange that these problems should be aired only at this stage.
May I say that it is strange how a person alters his position when he becomes a Member of the Opposition. I should have liked to have heard the right hon.

Member for Bexley (Mr. Heath) make the speech that he made tonight a year ago. I should have liked to have heard him make his impassioned plea for those who have to pay this burden of Stamp Duty. I look forward to the day when there is no stamp duty at all. Judging from what the right hon. Member for Bexley said tonight, I am surprised that I did not hear him express that opinion, when it really mattered.

The Clause does not appeal to me, because I do not think that it has been properly drafted. If a person buys a house costing £4,499, he pays no Stamp Duty at all, but if he buys a house costing £4,501 he pays duty on the total figure. I hope that in the Future consideration will be given to whether a person should pay Stamp Duty—if there is to be such a thing at all—only on the sum in excess of £4,500. I cannot accept the point which has been made that it is not really a graduated approach. I would rather have a ½ per cent. for one figure, which, I think, would be very much easier to deal with. I hope that the Chancellor will clear up this anomaly, if not this year, certainly next.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 270, Noes 274.

Division No. 235.]
AYES
[7.47 p.m.


Agnew, Commander Sir Peter
Brown, Sir Edward (Bath)
Currie, G. B. H.


Alison, Michael (Barkston Ash)
Bruce-Gardyne, J.
Dalkeith, Earl of


Allan, Robert (Paddington, S.)
Bryan, Paul
Dance, James


Allason, James (Hemel Hempstead)
Buchanan-Smith, Alick
Davies, Dr. Wyndham (Perry Barr)


Amery, Rt. Hn. Julian
Bullus, Sir Eric
d'Avigdor-Goldsmid, Sir Henry


Anstruther-Gray, Rt. Hn. Sir W.
Burden, F. A.
Dean, Paul


Astor, John
Butcher, Sir Herbert
Digby, Simon Wingfield


Atkins, Humphrey
Buxton, Ronald
Dodds-Parker, Douglas


Awdry, Daniel
Campbell, Gordon
Doughty, Charles


Baker, W. H. K.
Carlisle, Mark
Drayson, G. B.


Balniel, Lord
Carr, Rt. Hn. Robert
du Cann, Rt. Hn. Edward


Barber, Rt. Hn. Anthony
Cary, Sir Robert
Eden, Sir John


Barlow, Sir John
Channon, H. P. G.
Elliot, Capt. Walter (Carshalton)


Batsford, Brian
Chataway, Christopher
Elliott, R. W. (N'c'tle-upon-Tyne, N.)


Bell, Ronald
Chichester-Clark, R.
Emery, Peter


Bennett, Sir Frederic (Torquay)
Clark, Henry (Antrim, N.)
Eyre, Reginald


Berkeley, Humphry
Clark, William (Nottingham, S.)
Farr, John


Berry, Hn. Anthony
Clarke, Brig. Terence (Portsmth, W.)
Fell, Anthony


Biggs-Davison, John
Cole, Norman
Fisher, Nigel


Birch, Rt. Hn. Nigel
Cooke, Robert
Fletcher-Cooke, Charles (Darwen)


Black, Sir Cyril
Cooper, A. E.
Fletcher-Cooke, Sir John (S'pton)


Blaker, Peter
Cooper-Key, Sir Neill
Foster, Sir John


Bossom, Hn. Clive
Corfield, F. V.
Fraser, Rt. Hn. Hugh (St'fford Stone)


Bowen, Roderic (Cardigan)
Costain, A. P.
Fraser, Ian (Plymouth, Sutton)


Box, Donald
Courtney, Cdr. Anthony
Gammans, Lady


Boyd-Carpenter, Rt. Hn. J.
Craddock, Sir Beresford (Spelthorne)
Gibson-Watt, David


Braine, Bernard
Crawley, Aidan
Giles, Rear-Admiral Morgan


Brewis, John
Crosthwaite-Eyre, Col. Sir Oliver
Gilmour, Ian (Norfolk, Central)


Brinton, Sir Tatton
Crowder, F. P.
Gilmour, Sir John (East Fife)


Bromley-Davenport, Lt.-Col. Sir Walter
Cunningham, Sir Knox
Glover, Sir Douglas


Brooke, Rt. Hn. Henry
Curran, Charles
Glyn, Sir Richard




Godber, Rt. Hn. J. B.
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Rees-Davies, W. R.


Goodhart, Philip
Lloyd, Ian (P'tsm'th, Langstone)
Renton, Rt. Hn. Sir David


Goodhew, Victor
Lloyd, Rt. Hn. Selwyn (Wirral)
Ridley, Hn. Nicholas


Gower, Raymond
Longden, Gilbert
Ridsdale, Julian


Grant, Anthony
Loveys, Walter H.
Roberts, Sir Peter (Heeley)


Grant-Ferris, R.
Lubbock, Eric
Rodgers, Sir John (Sevenoaks)


Gresham Cooke, R.
Lucas, Sir Jocelyn
Roots, William


Griffiths, Eldon (Bury St. Edmunds)
McAdden, Sir Stephen
St. John-Stevas, Norman


Griffiths, Peter (Smethwick)
Mackenzie, Alasdair (Ross &amp; Crom'ty)
Sandys, Rt. Hn. D.


Gurden, Harold
Mackie, George Y. (C'ness &amp; S'land)
Scott-Hopkins, James


Hall, John (Wycombe)
McLaren, Martin
Sharples, Richard


Hall-Davis, A. G. F.
Maclean, Sir Fitzroy
Shepherd, William


Hamilton, Marquess of (Fermanagh)
Macleod, Rt. Hn. Iain
Sinclair, Sir George


Hamilton, M. (Salisbury)
McMaster, Stanley
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Harris, Frederic (Croydon, N. W.)
McNair-Wilson, Patrick
Smyth, Rt. Hn. Brig. Sir John


Harris, Reader (Heston)
Maginnis, John E.
Spearman, Sir Alexander


Harrison, Brian (Maldon)
Maitland, Sir John
Speir, Sir Rupert


Harvey, Sir Arthur Vere (Maccles'd)
Marples, Rt. Hn. Ernest
Stainton, Keith


Harvey, John (Walthamstow, E.)
Marten, Neil
Stanley, Hn. Richard


Harvie Anderson, Miss
Mathew, Robert
Steel, David (Roxburgh)


Hastings, Stephen
Maude, Angus
Studholme, Sir Henry


Hawkins, Paul
Maudling, Rt. Hn. Reginald
Talbot, John E.


Hay, John
Maxwell-Hyslop, R. J.
Taylor, Sir Charles (Eastbourne)


Heald, Rt. Hn. Sir Lionel
Maydon, Lt.-Cmdr. S. L. C.
Taylor, Edward M.(G'gow, Cathcart)


Heath, Rt. Hn. Edward
Meyer, Sir Anthony
Teeling, Sir William


Hendry, Forbes
Mills, Peter (Torrington)
Temple, John M.


Higgins, Terence L.
Mills, Stratton (Belfast, N.)
Thatcher, Mrs. Margaret


Hill, J. E. B. (S. Norfolk)
Miscampbell, Norman
Thomas, Sir Leslie (Canterbury)


Hirst, Geoffrey
Mitchell, David
Thompson, Sir Richard (Croydon, S.)


Hobson, Rt. Hn. Sir John
Monro, Hector
Tiley, Arthur (Bradford, W.)


Hooson, H. E.
More, Jasper
Tilney, John (Wavertree)


Hopkins, Alan
Morrison, Charles (Devizes)
Turton, Rt. Hn. R. H.


Hordern, Peter
Mott-Radclyffe, Sir Charles
Tweedsmuir, Lady


Hornby, Richard
Munro-Lucas-Tooth, Sir Hugh
van Straubenzee, W. R.


Hornsby-Smith, Rt. Hn. Dame P.
Murton, Oscar
Vaughan-Morgan Rt. Hn. Sir John


Hutchison, Michael Clark
Neave, Airey
Vickers, Dame Joan


Iremonger, T. L.
Noble, Rt. Hn. Michael
Walder, David (High Peak)


Irvine, Bryant Godman (Rye)
Nugent, Rt. Hn. Sir Richard
Walker, Peter (Worcester)


Jenkin, Patrick (Woodford)
Onslow, Cranley
Walker-Smith, Rt. Hn. Sir Derek


Jennings, J. C.
Orr, Capt. L. P. S.
Wall, Patrick


Johnston, Russell (Inverness)
Orr-Ewing, Sir Ian
Walters, Dennis


Jones, Arthur (Northants, S.)
Osborn, John (Hallam)
Ward, Dame Irene


Jopling, Michael
Osborne, Sir Cyril (Louth)
Weatherill, Bernard


Joseph, Rt. Hn. Sir Keith
Page, John (Harrow, W.)
Webster, David


Kaberry, Sir Donald
Page, R. Graham (Crosby)
Wells, John (Maidstone)


Kerby, Capt. Henry
Pearson, Sir Frank (Clitheroe)
Whitelaw, William


Kerr, Sir Hamilton (Cambridge)
Peel, John
Williams, Sir Rolf Dudley (Exeter)


Kershaw, Anthony
Percival, Ian
Wills, Sir Gerald (Bridgwater)


Kilfedder, James A.
Peyton, John
Wilson, Geoffrey (Truro)


Kimball, Marcus
Pickthorn, Rt. Hn. Sir Kenneth
Wise, A. R.


King, Evelyn (Dorset, S.)
Pike, Miss Mervyn
Wolridge-Gordon, Patrick


Kirk, Peter
Pitt, Dame Edith
Wood, Rt. Hn. Richard


Kitson, Timothy
Pounder, Rafton
Woodhouse, Hn. Christopher


Lagden, Godfrey
Powell, Rt. Hn. J. Enoch
Woodnutt, Mark


Lambton, Viscount
Price, David (Eastleigh)
Wylie, N. R.


Lancaster, Col. C. G.
Prior, J. M. L.
Yates, William (The Wrekin)


Langford-Holt, Sir John
Pym, Francis
Younger, Hn. George


Legge-Bourke, Sir Harry
Quennell, Miss J. M.



Lewis, Kenneth (Rutland)
Ramsden, Rt. Hn. James
TELLERS FOR THE AYES:


Litchfield, Capt. John
Redmayne, Rt. Hn. Sir Martin
Mr. G. Johnson Smith and




Mr. MacArthur.




NOES


Abse, Leo
Bradley, Tom
Cullen, Mrs. Alice


Albu, Austen
Bray, Dr. Jeremy
Dalyell, Tam


Allaun, Frank (Salford, E.)
Brown, Rt. Hn. George (Belper)
Darling, George


Alldritt, Walter
Brown, Hugh D. (Glasgow, Provan)
Davies, Ifor (Gower)


Atkinson, Norman
Buchan, Norman (Renfrewshire, W.)
Davies, S. O. (Merthyr)


Bacon, Miss Alice
Buchanan, Richard
de Freitas, Sir Geoffrey


Bagier, Gordon A. T.
Butler, Herbert (Hackney, C.)
Delargy, Hugh


Barnett, Joel
Butler, Mrs. Joyce (Wood Green)
Dell, Edmund


Baxter, William
Callaghan, Rt. Hn. James
Dempsey, James


Bence, Cyril
Carmichael, Neil
Diamond, Rt. Hn. John


Bennett, J. (Glasgow, Bridgeton)
Chapman, Donald
Dodds, Norman


Binns, John
Coleman, Donald
Doig, Peter


Bishop, E. S.
Conlan, Bernard
Driberg, Tom


Blackburn, F.
Corbet, Mrs. Freda
Duffy, Dr. A. E. P.


Blenkinsop, Arthur
Cousins, Rt. Hn. Frank
Dunn, James A.


Boardman, H.
Craddock, George (Bradford, S.)
Dunnett, Jack


Boston, T. G.
Crawshaw, Richard
Edelman, Maurice


Bottomley, Rt. Hn. Arthur
Cronin, John
Edwards, Robert (Bilston)


Bowden, Rt. Hn. H. W. (Leics S. W.)
Crosland, Rt. Hn. Anthony
English, Michael


Braddock, Mrs. E. M.
Crossman, Rt. Hn. R. H. S.
Ennals, David







Ensor, David
Ledger, Ron
Rees, Merlyn


Evans, Albert (Islington, S. W.)
Lee, Miss Jennie (Cannock)
Rhodes, Geoffrey


Evans, Ioan (Birmingham, Yardley)
Lever, Harold (Cheetham)
Richard, Ivor


Fernyhough, E.
Lever, L. M. (Ardwick)
Roberts, Albert (Normanton)


Finch, Harold (Bedwellty)
Lewis, Arthur (West Ham, N.)
Roberts, Goronwy (Caernarvon)


Fitch, Alan (Wigan)
Lewis, Ron (Carlisle)
Robertson, John (Paisley)


Fletcher, Ted (Darlington)
Lipton, Marcus
Robinson, Rt. Hn. K. (St. Pancras, N.)


Fletcher, Raymond (Ilkeston)
Loughlin, Charles
Rodgers, William (Stockton)


Floud, Bernard
Mabon, Dr. J. Dickson
Rogers, George (Kensington, N.)


Foley, Maurice
McBride, Neil
Rose, Paul B.


Foot, Sir Dingle (Ipswich)
McCann, J.
Ross, Rt. Hn. William


Foot, Michael (Ebbw Vale)
MacColl, James
Rowland, Christopher


Ford, Ben
MacDermot, Niall
Sheldon, Robert


Fraser, Rt. Hn. Tom (Hamilton)
McGuire, Michael
Shinwell, Rt. Hn. E.


Freeson, Reginald
McInnes, James
Shore, Peter (Stepney)


Galpern, Sir Myer
McKay, Mrs. Margaret
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)


Garrett, W. E.
Mackenzie, Gregor (Rutherglen)
Short, Mrs. Renée (W'hampton, N. E.)


George, Lady Megan Lloyd
McLeavy, Frank
Silkin, John (Deptford)


Ginsburg, David
Mahon, Peter (Preston, S.)
Silkin, S. C. (Camberwell, Dulwich)


Gourlay, Harry
Mahon, Simon (Bootle)
Silverman, Julius (Aston)


Greenwood, Rt. Hn. Anthony
Mallalieu, J. P. W. (Huddersfield, E.)
Silverman, Sydney (Nelson)


Gregory, Arnold
Manuel, Archie
Skeffington, Arthur


Griffiths, David (Rother Valley)
Mapp, Charles
Slater, Mrs. Harriet (Stoke, N.)


Griffiths, Rt. Hn. James (Llanelly)
Marsh, Richard
Small, William


Griffiths, Will (M'chester, Exchange)
Mason, Roy
Snow, Julian


Gunter, Rt. Hn. R. J.
Maxwell, Robert
Soskice, Rt. Hn. Sir Frank


Hale, Leslie
Mayhew, Christopher
Steele, Thomas (Dunbartonshire, W.)


Hamilton, James (Bothwell)
Mellish, Robert
Stewart, Rt. Hn. Michael


Hamilton, William (West Fife)
Mendelson, J. J.
Stonehouse, John


Hamling, William (Woolwich, W.)
Mikardo, Ian
Stones, William


Hannan, William
Millan, Bruce
Straus, Rt. Hn. G. R. (Vauxhall)


Harrison, Walter (Wakefield)
Miller, Dr. M. S.
Stross, Sir Barnett (Stoke-on-Trent, C.)


Hart, Mrs. Judith
Milne, Edward (Blyth)
Summerskill, Hn. Dr. Shirley


Hazell, Bert
Molloy, William
Swain, Thomas


Heffer, Eric S.
Monslow, Walter
Swingler, Stephen


Henderson, Rt. Hn. Arthur
Morris, Charles (Openshaw)
Symonds, J. B.


Herbison, Rt. Hn. Margaret
Morris, John (Aberavon)
Taverne, Dick


Hobden, Dennis (Brighton, K'town.)
Mulley, Rt. Hn. Frederick (Sheffield Pk)
Taylor, Bernard (Mansfield)


Holman, Percy
Murray, Albert
Thomas, George (Cardiff, W.)


Horner, John
Neal, Harold
Thomas, Iorwerth (Rhondda, W.)


Houghton, Rt. Hn. Douglas
Newens, Stan
Thomson, George (Dundee, E.)


Howarth, Harry (Wellingborough)
Noel-Baker, Francis (Swindon)
Thornton, Ernest


Howarth, Robert L. (Bolton, E.)
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Tinn, James


Howell, Denis (Small Heath)
Norwood, Christopher
Tomney, Frank


Howie, W.
Oakes, Gordon
Tuck, Raphael


Hoy, James
Ogden, Eric
Urwin, T. W.


Hughes, Cledwyn (Anglesey)
O'Malley, Brian
Varley, Eric G.


Hughes, Emrys (S. Ayrshire)
Oram, Albert E. (E. Ham, S.)
Walden, Brian (All Saints)


Hughes, Hector (Aberdeen, N.)
Orbach, Maurice
Walker, Harold (Doncaster)


Hunter, Adam (Dunfermline)
Orme, Stanley
Wallace, George


Hunter, A. E. (Feltham)
Oswald, Thomas
Warbey, William


Hynd, H. (Accrington)
Owen, Will
Watkins, Tudor


Irving, Sydney (Dartford)
Padley, Walter
Wells, William (Walsall, N.)


Jackson, Colin
Page, Derek (King's Lynn)
White, Mrs. Eirene


Janner, Sir Barnett
Paget, R. T.
Whitlock, William


Jay, Rt. Hn. Douglas
Pannell, Rt. Hn. Charles
Wigg, Rt. Hn. George


Jeger, George (Goole)
Pargiter, G. A.
Wilkins, W. A.


Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Park, Trevor (Derbyshire, S. E.)
Willey, Rt. Hn. Frederick


Jenkins, Hugh (Putney)
Parker, John
Williams, Alan (Swansea, W.)


Jenkins, Rt. Hn. Roy (Stetchford)
Parkin, B. T.
Williams, Clifford (Abertillery)


Johnson, Carol (Lewisham, S.)
Pavitt, Laurence
Williams, Mrs. Shirley (Hitchin)


Johnson, James (K'ston-on-Hull, W.)
Pearson, Arthur (Pontypridd)
Williams, W. T. (Warrington)


Jones, Dan (Burnley)
Pentland, Norman
Willis, George (Edinburgh, E.)


Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Perry, Ernest G.
Wilson, William (Coventry, S.)


Jones, J. Idwal (Wrexham)
Popplewell, Ernest
Winterbottom, R. E.


Jones, T. W. (Merioneth)
Prentice, R. E.
Woodburn, Rt. Hn. A.


Kelley, Richard
Price, J. T. (Westhoughton)
Woof, Robert


Kenyon, Clifford
Probert, Arthur
Wyatt, Woodrow


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Pursey, Cmdr. Harry
Yates, Victor (Ladywood)


Kerr, Dr. David (W'worth, Central)
Randall, Harry
Zilliacus, K.


Lawson, George
Rankin, John



Leadbitter, Ted
Redhead, Edward
TELLERS FOR THE NOES:




Mr. Harper and Mr. Grey.

New Clause.—(UNITED KINGDOM RESIDENCE.)

Where any person disposes of assets for the purpose of realising sufficient to purchase a residence in the United Kingdom, any gain arising from such disposal shall not be a chargeable gain:

Provided that—

(1) the said residence shall be intended to be the sole residence of such person;
(2) the purchaser shall not have occupied and owned a residence within the United Kingdom within ten years prior to the said purchase;


(3) the exemption from capital gains tax shall not apply to any amount realised exceeding £5,000, and
(4) the said exemption provided by this section shall benefit any person only once in his lifetime.—[Sir D. Renton.]

Brought up, and read the First time.

8.0 p.m.

Sir David Renton: I beg to move, That the Clause be read a Second time.
The Clause deals with Capital Gains Tax and, if accepted, would presumably be inserted after Clause 28. The Clause is of vital importance to thousands of members of the Armed Forces and their families and is of importance also to the 70,000 police officers and their families. This is why, among my right hon. and hon. Friends who support it, are two former Service Ministers and two former Home Office Ministers. Although the Clause is of such importance to the Armed Forces and to the police force, it has the added virtue that it fills a gap and rectifies an anomaly in the Bill as it stands—that is, in the Capital Gains Tax provisions of the Bill. To this extent, the Clause is, I concede, of wider application as well. The Government have rightly provided in Clause 28 for relief from Capital Gains Tax which would otherwise accrue on the disposal of a private residence when it is occupied by its owner. Without going into details and exceptions, that, broadly, is the effect of Clause 28.
Members of the Armed Forces and of the police force are nearly always in a position which cannot have been contemplated when Clause 28 was drafted. The very nature of their service requires them to move about. Police officers have to move about the county in which they serve. Whether in a county or in a borough, they generally have to live in police accommodation provided for them by the police authority. Members of the Armed Forces have to move about the world. They are very often compelled to live in accommodation specially provided for them. Indeed, I understand that under Queen's Regulations they can be compelled to occupy even married quarters. It follows from this that they cannot normally contemplate living in a home of their own until they retire and leave the Service.
During their service they save up for buying a house on retirement. There are several ways in which they can do so. One way—and the way with which we are most concerned in considering the Bill, and especially the new Clause—is for them to buy Government stock or other securities and then to sell their stock or their shares, as the case may be, on retirement and use the proceeds to buy a house. They should not be discouraged from this method of saving. Whatever other effect the Finance Bill may have, presumably the Government do not wish to discourage people from investing in Government securities, although we think that they may be discouraged.
At any rate, that is a method which is used by quite a number of Service people to save up during their lives and provide funds for the buying of a house. But, alas, if they use this method, they will have to pay the long-term Capital Gains Tax, which under Clause 19 will be 30 per cent. They will have to pay up to 30 per cent. on the proceeds of the sale of their securities before they can use the proceeds of sale for buying a home for their retirement. I suggest that that would be a very poor reward for their service to the country, especially as people who are not in the Services will, under the Bill, be able to continue to buy their houses as they live in them and occupy their houses as they save. On retirement they can sell their homes for capital gain and, quite rightly, thanks to Clause 28, they will not have to pay Capital Gains Tax on the transaction. This is a most absurdly contrasted position between Service people and the police, on the one hand, and others buying, saving and living in their homes, on the other.
I concede that if the Clause were accepted it would sometimes benefit others who have not been in the Armed Forces or the police force. Those of us who have drafted the Clause have foreseen that. The proviso sets four limitations which will apply and which should make the Clause more acceptable to the Government. They make the Clause into a very modest provision. We say, first, that the residence which is to be bought shall be the sole residence of the person concerned. We say, secondly, that the purchaser shall not have occupied and owned any house within the United Kingdom within 10 years before the purchase.


We say, thirdly, that the exemption from Capital Gains Tax shall apply only to the first £5,000 of the proceeds of sale of the assets concerned. We say, lastly, that this is an exemption which will apply only once in a person's lifetime.
Therefore, the cost of the exemption could not be very great. The opportunities for abuse are practically nil. Phrased as it is, and with that proviso, the Clause would meet precisely the needs of members of the Armed Forces which I have endeavoured to describe. I quote from a letter which I have received from the wife of a serving officer in the Royal Air Force in my constituency:
Under this year's Finance Bill we stand to lose 30 per cent. of the capital appreciation of our savings; our counterpart in civil life who is buying his own house as his form of saving can sell his house when he retires without paying any tax on his capital gain. It would seem that personnel serving in the Armed Services cannot now save in such a way as to offset the rising prices and falling value of the £.
My correspondent also says:
We are saving towards the day when we shall want to buy the house and a large proportion of our savings are in the shares of various companies and unit trusts.
That is a perfectly sensible and laudable thing for these people to be doing. We are not wedded to the exact phraseology of the Clause, but it seems that unless the new Clause, or something like it, which incorporates in the Bill the spirit behind it, is accepted there will be a serious anomaly. There will also be a serious injustice, which will bear very harshly upon members of the Armed Forces and of the police force, whose welfare and interest we in the House have a great duty to protect.

Mr. Gower: It will also apply, I imagine, to a considerable number of people who have been engaged in the teaching profession and living in various forms of school houses, and to people in similar categories.

Sir D. Renton: In the course of my speech I have conceded that, in the nature of things, the Clause would have a wider application. My hon. Friend has given the example of members of the teaching profession, very fine people who ought not to be penalised in the way in which they will be penalised under the Bill. One can think of others. One can think of those members of the public service

who, for example, serve abroad and those who have helped this country by living their working lives abroad, but who look forward one day to buying a home in this country for their retirement.
I have stated the case as moderately as I can, and I hope that we shall have a sympathetic response from the Government.

Rear-Admiral Morgan Giles: I support my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton). This proposed Clause should instantly commend itself to any Chancellor of the Exchequer, and particularly to a Chancellor belonging to a party whose members so often have the words "social justice" on their lips.
This Clause seeks to provide social justice for those whose calling prevents them from owning a house of their own until relatively late in life. As my right hon. and learned Friend has pointed out, the category which first comes to mind is that of the Armed Forces. Officers and men of the Navy, Army and Air Force, who are in the very nature of things likely to be sent anywhere in the world at short notice, face a special dilemma when they marry. Either they must buy a house and install their families there, and risk thereafter seeing very little indeed of their families, or alternatively the families must follow the fleet, so to speak, and have no house of their own.
I can testify from many years of experience that a condition of no fixed abode has very real disadvantages, especially for families, and particularly children, let alone what it does to the men concerned. My experience is not only personal, involving my own family, but it also arises from a considerable number of years as a commanding officer of ships at sea and overseas, whose ships companies often get themselves into great difficulty due to what one might call a chronic condition of homelessness. If this condition has real disadvantages for officers, as it does, it has perhaps even greater disadvantages for other ranks who, through no fault of their own, often find it particularly difficult to meet the additional expenses of constantly moving house and home.
It can be argued that separation and constant moving are inevitable in Service


life, that people go into the Services with their eyes open and must accept this feature of life in the Services. This is, no doubt, to some extent true, but I do not think this is the point at issue here. The point is that if Service people are effectively debarred from owning their own houses, when they eventually come to buy a house later in life, either on retirement or when their children reach school age, houses will by that time have become much more expensive to buy, as my right hon. and learned Friend has pointed out. Certainly, this has been the case in the conditions of inflation which have existed ever since the end of the war.
My right hon. and learned Friend pointed out that it is not only members of the Armed Services who would be affected by this Clause. There are policemen, prison officers, of whom I have a large number in my constituency, nurses, certain civil servants, people in the Foreign Service, and people who work overseas perhaps in support of this country's export initiatives. All these have one thing in common, and that is that they are people of value to the community. They are people of first-class quality, whom any Government must be anxious to recruit. Therefore, this is more than a financial measure. If this Clause were accepted, it might be found to have a remarkable effect on recruiting to these categories of people whom we are discussing.
8.15 p.m.
The Clause as drafted seems to me to cover the circumstances very well indeed. It is absolutely clear and concise. It leaves no loopholes. In fact, I think that my only objection to it is that it does not go far enough, especially as regards the upper limits mentioned in subsection (3). There is one further point to be said in favour of the Clause, and that is that it is completely comprehensible, and in this way it is in considerable contrast to many Clauses in the Bill.
I therefore support the Clause very strongly as providing a measure of social justice for sections of the community who deserve very well of their country.

Mr. James Ramsden: I wish briefly to support the Clause, which was moved by my right hon. and learned

Friend the Member for Huntingdonshire (Sir D. Renton) in eminently reasonable terms. I do not wish to reiterate his arguments because he put them extremely cogently, but I should like to underline one aspect of what he said.
It is undoubtedly true that the problem of where to house themselves and their families is extremely important for members of all three Services, particularly during the latter years of their engagement. Speaking from memory, in the Army alone there are about 15,000 men running out every year, and that is only one Service. Therefore, this is not a negligible problem affecting a negligible number of people. When they leave the Services they need somewhere to live. They cannot always get a house to rent.
As hon. Members on both sides of the House know, this is a considerable problem for local authorities constantly having Service families added to their waiting lists. They are extremely helpful for the most part, and I am sure we all wish to pay tribute to their efforts, but they cannot conceivably in fairness to their own people, cope with the whole of the demand, and the fact is that many of these Service families, if not the majority, must satisfy their needs by buying houses of their own.
It was in recognition of this fact, and the importance of this factor in Service life, that the former Government instituted what was called a "Save while you serve" scheme to promote among Service men the desire to save weekly, from their pay packets, with a building society with the specific object of buying their houses when they came out. Probably this scheme is not affected by this Clause, but I ask the Financial Secretary for an assurance that the Capital Gains Tax will in no conceivable circumstances have any impact on savings through this scheme with building societies for the future purchase of their homes by Service men.
Of course, there are many who do not wish to save through building societies, but who wish to save in other ways. The savings they can make are very often substantial. It is nothing unusual in these days, at present Service rates of pay, for a man to earn £15 or £20 a week. Accommodated in married quarters and drawing all the appropriate allowances,


he can make appreciable weekly savings and may, during his service, accumulate a capital sum in the region of the figures that we are talking about in this Clause.
More often than not, these savings are pre-empted for the eventual purchase of a home. If the Clause is not accepted we shall have the position of which my right hon. and learned Friend the Member for Huntingdonshire gave an example—a Service family on the one hand and a civilian family on the other, both on the same rate of pay, both with the same number of children, and both of the same age. The civilian family will have settled down and put their savings into a house, and to the extent that their savings are invested in house property they will be both hedged against inflation and, if the house is sold and replaced by another, exempt from the impact of Capital Gains Tax.
With the Service family, on the other hand, because they have had to postpone the moment of converting savings into a house and they hold those savings in some form of investment, when the time comes for them to be realised and put into a house property they will be subject to the diminution of a 30 per cent. Capital Gains Tax.
This seems to me to be a totally indefensible anomaly and I cannot think of an hon. Member who would wish to see that perpetuated. I draw attention, as my right hon. and learned Friend did, to the extremely moderate way in which the Clause is drawn. It is so hedged about with restriction that it cannot possibly be open to abuse, and it is drawn as nearly as it can be so as to direct the benefits to the class of people whom we believe will be seriously prejudiced in their housing as compared with similar people if the Clause is not accepted.

Mr. Gower: After listening to the debate I feel that the Financial Secretary to the Treasury will not have the heart to reject so worthy a Clause as this which has been put forward in such clear and reasonable terms. The need for the Clause applies not only to the Armed Services but also to members of the police force, to members of the remaining Colonial Service, to businessmen who have worked abroad and also, as I sug- 
gested in an intervention, to some members of the teaching profession. The need for it applies in a particularly aggravated form to certain ministers of religion who have lived their active lives in rectories and manses and have to make provision for themselves when they retire.
As my right hon. Friend the Member for Harrogate (Mr. Ramsden) pointed out, this is an extremely difficult situation for these people, because in many cases they cannot obtain accommodation from local authorities. Some local authorities make every effort but others are either not able or not willing to make the same effort to accommodate them, and these people are placed in the predicament of having to make provision for themselves. As for the police force, only recently I visited a new kind of police house and I expressed to the police officer and his wife my feeling that it was much superior to the kind which I had seen in the past. The police officer said rather ruefully, "In some ways I wish that I had not had this house, because when I leave I shall have to buy a house and at a very high price." The market is always moving against these people and it has been so moving for many years. This makes their case all the stronger.
Schoolmasters and housemasters who have lived in houses provided for them have to make provision for themselves at the least convenient time. They have to acquire a house on a high market when their income is declining, when they have ceased to earn a full income and are trying to live on a pension. The strain on them is all the greater for these reasons. I repeat that I cannot believe that the Financial Secretary will feel able to reject the new Clause.

Mr. MacDermot: The hon. Member for Barry (Mr. Gower) under-rates my capacity. The right hon. and learned Member for Huntingdonshire (Sir D. Renton), who moved the new Clause in very moderate terms, said that he was doing so particularly from the standpoint of people in the Armed Forces and the police force. It is significant that there is nothing whatever in the Clause which provides a clue that that was his intention, and I think that he recognised that as the Clause is worded it would go considerably wider. I do not want to


try to take niggling points against him, because he could fairly retort that if his proposal had been confined I could reply that if the principle were right it should be extended more widely, which is the answer that I gave to an agricultural new Clause which was moved earlier today.
I have to stress that when we are in this field of taxation and it is sought to introduce a concession we must consider where it will end, because we must operate on a basis of principle. From the point of view of anyone who is trying to devise a reasonable and fair system of taxation this is the great difficulty in making any kind of concession. The argument today results directly from the fact that my right hon. Friend the Chancellor of the Exchequer gave a very generous concession to the home owner, a concession which has been criticised in some quarters as going too far.
As I pointed out in a previous debate, it goes further than the American concession or any concession to home owners under any other capital gains system. The result is that people who have no homes and would like to have homes say that if there is to be a concession for the home owner there ought to be one for them. All that I would point out is that this would be introducing quite a new and different principle.
It is one thing to say that we attach an exemption to a particular type of asset, namely, a person's sole residence. It is quite another to say, "We shall grant an exemption for a certain sum on the realisation of any kind of asset at all provided that the intention is to apply the proceeds to a particular purpose".
If this were done, it would inevitably lead to pressures and arguments for the exemption of the realisation of exactly the same kind of assets, but for different purposes—other quite laudable purposes, charitable purposes, for instance, which one could not criticise in any way. It would be said that we had allowed a man to realise all his securities and the gains on them over a period of 20 years, exempting them if he intended to use them for buying a house; why not grant exemption if he does it for a charitable purpose, to provide for a relative or whatever it might be? Inevitably, we should be led to the position of being

forced to give something which was asked for in Committee, that is, exemption in respect of the first £x of gain, however much it might be—the first £500 of gain, or something like that.
8.30 p.m.
We debated this at length in Committee, and I sought to explain, also at rather great length, what were the objections to that course. What we have done instead is to provide an alternative basis of charge. The right hon. and learned Gentleman, giving the example of a Service man or policeman—for the moment, I forget which—said that, when the time came and he realised his assets to buy a house, he would have to pay 30 per cent. on the proceeds of the sale. That is quite untrue. He has to pay tax not on the proceeds of the sale, but on the gain, the element of capital gain in the proceeds.
It is also not right to say that the ordinary person would pay 30 per cent. What hon. Members opposite seem to have forgotten or failed to realise is that the vast majority of taxpayers will never be liable at the 30 per cent. rate at all. Broadly speaking, particularly if the House accepts Amendments which we have put down for later consideration, it is the Surtax payer who will pay at 30 per cent. This is the point I was trying to make when we had our famous argument about "MacDermot's Law". I said that what was a fair rate of tax—[Laughter.] The hon. Member for Worcester (Mr. Peter Walker) may laugh, but perhaps he will look up the debate and see. I was seeking to point out what would be the fair rate of Capital Gains Tax in comparison with the highest class of Surtax payer; and the 30 per cent. rate, broadly speaking, will be paid by the Surtax payers, and not even by all of them. There will still be quite a number of Surtax payers who will benefit from the alternative basis of charge. Under our proposals, if the House approves them, the broad effect will be that the person whose marginal rate of Income Tax is the standard rate will pay Capital Gains Tax at just over 20 per cent.
I repeat the hope, the rather forlorn hope, that hon. Members opposite will not, in their political zeal, go about spreading quite wrong and unnecessary fears in the minds of the people they are arguing for by suggesting to them that


they will incur a liability to tax far beyond anything for which the Bill provides. Also, perhaps they will remind the people that the Bill applies only to gains from Budget day, another matter which, judging from the queries I have received, seems to be often forgotten.

Rear-Admiral Morgan Giles: The hon. and learned Gentleman has been arguing that our proposal would be the thin edge of the wedge. Is it not fairer to say that all we have proposed under the Clause is to be regarded as merely the extension of the already admitted principle of exemption as applied to the sole residence?

Mr. MacDermot: That is my point. The moment one concession is made, there are immediate demands for the same concession to be made elsewhere. But we are drawing the line.
It is a tenable position to hold that we have granted an exemption for a particular kind of asset. Once we started on the slope of granting a general exemption for all kinds of assets when used for a particular purpose, we should not be able to distinguish other equally laudable and deserving purposes for which demands would immediately be made.
The argument in the House today has been largely directed to the particular needs of Service men. The hon. and gallant Member for Winchester (Rear-Admiral Morgan Giles) will know that my right hon. Friend the Minister of Defence for the Royal Navy has announced that discussions are in progress with a view to introducing a house purchase scheme within the Navy for the express purpose of assisting recruitment. We are very much alive to these matters.
Once again, we have had the argument about the Service man who spends a lot of his life abroad and then returns to this country and buys a house. I cannot go into details on matters which will be the subject of later debate, but on the Notice Paper there is an Amendment which extends the relief for the owner of an occupied house so that a man who chooses when overseas to make his investment in a house which he can let, can later enjoy the exemption which attaches to that house although he has not been able to live in it because of his service abroad.

Mr. Ramsden: But can that man get the people out when he comes back?

Mr. MacDermot: That depends on many factors. If hon. Members will look at the Rent Act they will see that one of the grounds for possession of a protected tenancy is that it is required by the owner for his own occupation. If it has been made clear to the tenant at the time of the making of the tenancy that the owner is intending to occupy the house when he completes his service overseas, I cannot see any county court judge refusing him possession.
The answer is that the matters which have been raised in argument in support of the Clause are ones to which we are alive, and that where it is proper and we are able to do so, we have given assistance under the Bill. Other matters are dealt with in other ways. But, for the reasons which I have stated, we cannot accept the Clause.

Mr. Peter Walker: The Financial Secretary referred to the possibility of hon. Members on this side of the House, with their political zeal, giving a wrong impression of what the Government are doing in the way of taxation. All I can say is that in pursuit of that zeal I should like to send a copy of the debate to all the people in the Services and police forces.
I did not expect the complacent reply to the debate that we have received from the Financial Secretary. The Clause was tabled in the name of a former Minister at the Home Office who has had considerable experience of the police forces and in the names of two former Service Ministers, and it has been debated in a manner which put quite clearly to the House the very real problems which arise for the people affected. It is not good enough for the Financial Secretary to dismiss the arguments purely on the ground that this is an extension of a concession, or that it meant a new principle.
What the Financial Secretary failed to do was to say how he would assist people with this problem. He is wrong in saying that people overseas can buy a house and let it to somebody and take possession of it when they return. It is almost impossible to obtain a mortgage for a house that one proposes to let. Normally, one can obtain mortgages only for owner-occupation. Therefore, people in the Services going overseas and people in the


police forces with accommodation provided by local authorities do not obtain mortgages to buy houses and then repay the mortgages. They go in for various types of saving, and some of the types will not be affected by capital gains. If they deposit money with a building society no capital gain takes place.
My right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) mentioned those who invest in gilt-edged securities and would frequently be advised to do so by their bank managers. Others would invest in local authority securities and some in first-class equities and unit trusts. Over the years these people have been proved to be correct and have had a main defence against inflation. Some people do it by means of life insurance. But the Government are to tax the investments of the life companies at the rate of 35 per cent., irrespective of the means of the individual, and, therefore, that method of saving for house purchase will be less attractive as a result of the provisions of the Bill.
The people wishing to save over a period of years are of many types. They include clergy and also shopkeepers, many of whom live in rented accommodation and, at the end of their careers, move out and want to purchase their own homes. The hon. and learned Gentleman is right in saying that the Clause would apply to everybody. It would apply to young people saving up for the deposit on their homes. Why not? What a very good thing that it should. These young people should realise that we believe that their savings should not be liable to this tax.
The other factor is that those saving up to buy their own houses have to do so in such a way as to protect their savings against inflation. Under the last Labour Government there was 40 per cent. inflation. The price of houses in the last six months has gone up by 5 per cent. There is need for people to find a vehicle for savings that will protect them against inflation. They are now to find that their skilful saving is to be subject to 20 per cent. to 30 per cent. Capital Gains Tax.
This is a human problem. Many of those affected will have spent 20 or 30

years of service overseas. They will be more elderly persons. People in their 50s and 60s find it difficult if not impossible to obtain a mortgage and therefore must find this large amount of money it they are to get a home of their own.
The Clause has been modestly and carefully drawn. The hon. and learned Gentleman did not mention the possible cost of the Clause because he knows that it would be minute. Nevertheless, it would solve a genuine problem for many people. I am surprised at his return to "MacDermot's Law". "MacDermot's Law, Mark II" is an improvement on "MacDermot's Law, Mark I", because that was: the higher the tax the lower the concession.

Mr. MacDermot: With respect, it was not.

Mr. Walker: Although I would expect the hon. and learned Gentleman to be an expert on "MacDermot's Law" I think that a reading of our proceedings in Committee will convince him that "MacDermot's Law, Mark I" fitted into that principle. Now we have "MacDermot's Attitude", which is probably even worse than "MacDermot's Law".
An earlier attempt to secure a concession for house purchase was rejected on the ground of cost. This attempt to get a concession for a particularly worthy group of people is dismissed, not because it is too expensive, but on the ground that it would embark on a new principle and be a further concession, even though small. The Government's attitude has been miserably mean and I hope that my right hon. and hon. Friends will divide the House in support of the Clause.

Sir D. Renton: If I may, by leave of the House—

Mr. Deputy-Speaker (Sir Samuel Storey): Order. The right hon. and learned Gentleman has exhausted his right to speak.

Sir D. Renton: I have no intention of making another speech, Mr. Deputy-Speaker.

Mr. Deputy-Speaker: The right hon. and learned Gentleman can only speak by leave of the House.

Sir D. Renton: I thought that I had prefaced my remarks with the words, "If I may, by leave of the House", but perhaps you did not hear me, Mr. Deputy-Speaker.
Perhaps I may now, by leave of the House, assure the Financial Secretary, who recently accused me of misleading the House, that I did not intend to do so. When he reads HANSARD tomorrow he will find that I did not. If he consults the White Paper on the Capital Gains Tax he will find that it is categorically

stated that it will be a tax of 30 per cent. and we have to take that at its face value.

Mr. MacDermot: I cannot let this pass. The right hon. and learned Gentleman cannot merely take one sentence alone. There is to be a basic rate of tax and an alternative charge. The vast majority of taxpayers involved will be taxed on the alternative basis and not on the basic rate.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 269, Noes 275.

Division No. 236.]
AYES
[8.45 p.m.


Agnew, Commander Sir Peter
Curran, Charles
Hobson, Rt. Hn. Sir John


Alison, Michael (Barkston Ash)
Currie, G. B. H.
Hooson, H. E.


Allan, Robert (Paddington, S.)
Dalkeith, Earl of
Hopkins, Alan


Allason, James (Hemel Hempstead)
Dance, James
Hordern, Peter


Amery, Rt. Hon. Julian
Davies, Dr. Wyndham (Perry Barr)
Hornby, Richard


Anstruther-Gray, Rt. Hn. Sir W.
d'Avigdor-Goldsmid, Sir Henry
Hornsby-Smith, Rt. Hn. Dame P.


Astor, John
Dean, Paul
Hutchison, Michael Clark


Atkins, Humphrey
Digby, Simon Wingfield
Iremonger, T. L.


Awdry, Daniel
Dodds-Parker, Douglas
Irvine, Bryant Godman (Rye)


Baker, W. H. K.
Doughty, Charles
Jenkin, Patrick (Woodford)


Balniel, Lord
Drayson, G. B.
Jennings, J. C.


Barber, Rt. Hn. Anthony
du Cann, Rt. Hn. Edward
Johnson Smith, G. (East Grinstead)


Barlow, Sir John
Eden, Sir John
Johnston, Russell (Inverness)


Batsford, Brian
Elliot, Capt. Walter (Carshalton)
Jones, Arthur (Northants, S.)


Bell, Ronald
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Jopling, Michael


Bennett, Sir Frederic (Torquay)
Emery, Peter
Joseph, Rt. Hn. Sir Keith


Berkeley, Humphry
Eyre, Reginald
Kaberry, Sir Donald


Berry, Hn, Anthony
Farr, John
Kerby, Capt. Henry


Biggs-Davison, John
Fell, Anthony
Kerr, Sir Hamilton (Cambridge)


Birch, Rt. Hn. Nigel
Fisher, Nigel
Kershaw, Anthony


Black, Sir Cyril
Fletcher-Cooke, Charles (Darwen)
Kilfedder, James A.


Blaker, Peter
Fletcher-Cooke, Sir John (S'pton)
Kimball, Marcus


Bossom, Hn. Clive
Foster, Sir John
King, Evelyn (Dorset, S.)


Bowen, Roderic (Cardigan)
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Kirk, Peter


Box, Donald
Fraser, Ian (Plymouth, Sutton)
Kitson, Timothy


Boyd-Carpenter, Rt. Hn. J.
Gammans, Lady
Lagden, Godfrey


Braine, Bernard
Gibson-Watt, David
Lambton, Viscount


Brewis, John
Giles, Rear-Admiral Morgan
Lancaster, Col. C. G.


Brinton, Sir Tatton
Gilmour, Ian (Norfolk, Central)
Langford-Holt, Sir John


Bromley-Davenport, Lt.-Col. Sir Walter
Gilmour, Sir John (East Fife)
Legge-Bourke, Sir Harry


Brooke, Rt. Hn. Henry
Glover, Sir Douglas
Lewis, Kenneth (Rutland)


Brown, Sir Edward (Bath)
Glyn, Sir Richard
Litchfield, Capt. John


Bruce-Gardyne, J.
Godber, Rt. Hn. J. B.
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)


Bryan, Paul
Goodhart, Philip
Lloyd, Ian (P'tsm'th, Langstone)


Buchanan-Smith, Alick
Goodhew, Victor
Longden, Gilbert


Bullus, Sir Eric
Gower, Raymond
Loveys, Walter H.


Burden, F. A.
Grant, Anthony
Lubbock, Eric


Butcher, Sir Herbert
Grant-Ferris, R.
Lucas, Sir Jocelyn


Buxton, Ronald
Gresham Cooke, R.
McAdden, Sir Stephen


Campbell, Gordon
Griffiths, Eldon (Bury St. Edmunds)
MacArthur, Ian


Carlisle, Mark
Griffiths, Peter (Smethwick)
Mackenzie, Alasdair (Ross &amp; Crom'ty)


Carr, Rt. Hn. Robert
Gurden, Harold
Mackie, George Y. (C'ness &amp; S'land)


Cary, Sir Robert
Hall, John (Wycombe)
McLaren, Martin


Channon, H. P. G.
Hall-Davis, A. G. F.
Maclean, Sir Fitzroy


Chataway, Christopher
Hamilton, Marquess of (Fermanagh)
Macleod, Rt. Hn. Iain


Chichester-Clark, R.
Hamilton, M. (Salisbury)
McMaster, Stanley


Clark, Henry (Antrim, N.)
Harris, Frederic (Croydon, N. W.)
McNair-Wilson, Patrick


Clark, William (Nottingham, S.)
Harris, Reader (Heston)
Maginnis, John E.


Clarke, Brig. Terence (Portsmth, W.)
Harrison, Brian (Maldon)
Maitland, Sir John


Cole, Norman
Harvey, Sir Arthur Vere (Macclesf'd)
Marten, Neil


Cooke, Robert
Harvey, John (Walthamstow, E.)
Mathew, Robert


Cooper, A. E.
Harvie Anderson, Miss
Maude, Angus


Cooper-Key, Sir Neill
Hastings, Stephen
Maudling, Rt. Hn. Reginald


Corfield, F. V.
Hawkins, Paul
Maxwell-Hyslop, R. J.


Costain, A. P.
Hay, John
Maydon, Lt.-Cmdr. S. L. C.


Courtney, Cdr. Anthony
Heald, Rt. Hn. Sir Lionel
Meyer, Sir Anthony


Craddock, Sir Beresford (Spelthorne)
Heath, Rt. Hn. Edward
Mills, Peter (Torrington)


Crawley, Aidan
Hendry, Forbes
Mills, Stratton (Belfast, N.)


Crosthwaite-Eyre, Col. Sir Oliver
Higgins, Terence L.
Miscampbell, Norman


Crowder, F. P.
Hill, J. E. B. (S. Norfolk)
Mitchell, David


Cunningham, Sir Knox
Hirst, Geoffrey
Monro, Hector




Morrison, Charles (Devizes)
Rees-Davies, W. R.
Turton, Rt. Hn. R. H.


Mott-Radclyffe, Sir Charles
Renton, Rt. Hn. Sir David
Tweedsmuir, Lady


Munro-Lucas-Tooth, Sir Hugh
Ridley, Hn. Nicholas
van Straubenzee, W. R.


Murton, Oscar
Ridsdale, Julian
Vaughan-Morgan, Rt. Hn. Sir John


Neave, Airey
Roberts, Sir Peter (Heeley)
Vickers, Dame Joan


Nicholson, Sir Godfrey
Rodgers, Sir John (Sevenoaks)
Walder, David (High Peak)


Noble, Rt. Hn. Michael
Roots, William
Walker, Peter (Worcester)


Nugent, Rt. Hn. Sir Richard
St. John-Stevas, Norman
Walker-Smith, Rt. Hn. Sir Derek


Onslow, Cranley
Sandys, Rt. Hn. D.
Wall, Patrick


Orr, Capt. L. P. S.
Scott-Hopkins, James
Walters, Dennis


Orr-Ewing, Sir Ian
Sharples, Richard
Ward, Dame Irene


Osborn, John (Hallam)
Shepherd, William
Weatherill, Bernard


Osborne, Sir Cyril (Louth)
Sinclair, Sir George
Webster, David


Page, John (Harrow, W.)
Smyth, Rt. Hn. Brig. Sir John
Wells, John (Maidstone)


Page, R. Graham (Crosby)
Spearman, Sir Alexander
Whitelaw, William


Pearson, Sir Frank (Clitheroe)
Speir, Sir Rupert
Williams, Sir Rolf Dudley (Exeter)


Peel, John
Stainton, Keith
Wills, Sir Gerald (Bridgwater)


Percival, Ian
Stanley, Hn. Richard
Wilson, Geoffrey (Truro)


Peyton, John
Steel, David (Roxburgh)
Wise, A. R.


Pickthorn, Rt. Hn. Sir Kenneth
Studholme, Sir Henry
Wolrige-Gordon, Patrick


Pike, Miss Mervyn
Talbot, John E.
Wood, Rt. Hn. Richard


Pitt, Dame Edith
Taylor, Sir Charles (Eastbourne)
Woodhouse, Hn. Christopher


Pounder, Rafton
Taylor, Edward M. (G'gow, Cathcart)
Woodnutt, Mark


Powell, Rt. Hn. J. Enoch
Teeling, Sir William
Wylie, N. R.


Price, David (Eastleigh)
Temple, John M.
Yates, William (The Wrekin)


Prior, J. M. L.
Thatcher, Mrs. Margaret
Younger, Hn. George


Pym, Francis
Thomas, Sir Leslie (Canterbury)



Quennell, Miss J. M.
Thompson, Sir Richard (Croydon, S.)
TELLERS FOR THE AYES:


Ramsden, Rt. Hn. James
Tiley, Arthur (Bradford, W.)
Mr. More and Mr. Dudley Smith.


Redmayne, Rt. Hn. Sir Martin
Tilney, John (Wavertree)





NOES


Abse, Leo
Driberg, Tom
Howarth, Harry (Wellingborough)


Albu, Austen
Duffy, Dr. A. E. P.
Howarth, Robert L. (Bolton, E.)


Allaun, Frank (Salford, E.)
Dunn, James A.
Howell, Denis (Small Heath)


Alldritt, Walter
Dunnett, Jack
Hoy, James


Atkinson, Norman
Edelman, Maurice
Hughes, Cledwyn (Anglesey)


Bacon, Miss Alice
Edwards, Robert (Bilston)
Hughes, Emrys (S. Ayrshire)


Bagier, Gordon A. T.
English, Michael
Hughes, Hector (Aberdeen, N.)


Barnett, Joel
Ennals, David
Hunter, Adam (Dunfermline)


Baxter, William
Ensor, David
Hunter, A. E. (Feltham)


Bence, Cyril
Evans, Albert (Islington, S. W.)
Hynd, H. (Accrington)


Bennett, J. (Glasgow, Bridgeton)
Evans, Ioan (Birmingham, Yardley)
Irving, Sydney (Dartford)


Binns, John
Fernyhough, E.
Jackson, Colin


Bishop, E. S.
Finch, Harold (Bedwellty)
Janner, Sir Barnett


Blackburn, F.
Fitch, Alan (Wigan)
Jay, Rt. Hn. Douglas


Blenkinsop, Arthur
Fletcher, Ted (Darlington)
Jeger, George (Goole)


Boardman, H.
Fletcher, Raymond (Ilkeston)
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)


Boston, T. G.
Floud, Bernard
Jenkins, Hugh (Putney)


Bottomley, Rt. Hn. Arthur
Foley, Maurice
Jenkins, Rt. Hn. Roy (Stechford)


Bowden, Rt. Hn. H. W. (Leics S. W.)
Foot, Sir Dingle (Ipswich)
Johnson, Carol (Lewisham, S.)


Braddock, Mrs. E. M.
Foot, Michael (Ebbw Vale)
Johnson, James (K'ston-on-Hull, W.)


Bradley, Tom
Ford, Ben
Jones, Dan (Burnley)


Bray, Dr. Jeremy
Fraser, Rt. Hn. Tom (Hamilton)
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)


Brown, Hugh D. (Glasgow, Provan)
Freeson, Reginald
Jones, J. Idwal (Wrexham)


Buchan, Norman (Renfrewshire, W.)
Galpern, Sir Myer
Jones, T. W. (Merioneth)


Buchanan, Richard
Garrett, W. E.
Kelley, Richard


Butler, Herbert (Hackney, C.)
George, Lady Megan Lloyd
Kenyon, Clifford


Butler, Mrs. Joyce (Wood Green)
Ginsburg, David
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Callaghan, Rt. Hn. James
Gourlay, Harry
Kerr, Dr. David (W'worth, Central)


Carmichael, Neil
Greenwood, Rt. Hn. Anthony
Lawson, George


Chapman, Donald
Gregory, Arnold
Leadbitter, Ted


Coleman, Donald
Grey, Charles
Ledger, Ron


Conlan, Bernard
Griffiths, David (Rother Valley)
Lee, Miss Jennie (Cannock)


Corbet, Mrs. Freda
Griffiths, Rt. Hn. James (Llanelly)
Lever, Harold (Cheetham)


Cousins, Rt. Hn. Frank
Griffiths, Will (M'chester, Exchange)
Lever, L. M. (Ardwick)


Craddock, George (Bradford, S.)
Gunter, Rt. Hn. R. J.
Lewis, Arthur (West Ham, N.)


Crawshaw, Richard
Hale, Leslie
Lewis, Ron (Carlisle)


Cronin, John
Hamilton, James (Bothwell)
Lipton, Marcus


Crosland, Rt. Hn. Anthony
Hamilton, William (West Fife)
Loughlin, Charles


Crossman, Rt. Hn. R. H. S.
Hamling, William (Woolwich, W.)
Mabon, Dr. J. Dickson


Cullen, Mrs. Alice
Hannan, William
McBride, Neil


Dalyell, Tam
Harper, Joseph
McCann, J.


Darling, George
Harrison, Walter (Wakefield)
MacColl, James


Davies, Ifor (Gower)
Hart, Mrs. Judith
MacDermot, Niall


Davies, S. O. (Merthyr)
Hazell, Bert
McGuire, Michael


de Freitas, Sir Geoffrey
Heffer, Eric S.
McInnes, James


Delargy, Hugh
Henderson, Rt. Hn. Arthur
McKay, Mrs. Margaret


Dell, Edmund
Herbison, Rt. Hn. Margaret
Mackenzie, Gregor (Rutherglen)


Dempsey, James
Hobden, Dennis (Brighton, K'town)
McLeavy, Frank


Diamond, Rt. Hn. John
Holman, Percy
Mahon, Peter (Preston, S.)


Dodds, Norman
Horner, John
Mahon, Simon (Bootle)


Doig, Peter
Houghton, Rt. Hn. Douglas
Mallalieu, J. P. W. (Huddersfield, E.)







Manuel, Archie
Pentland, Norman
Swain, Thomas


Mapp, Charles
Perry, Ernest G.
Swingler, Stephen


Marsh, Richard
Popplewell, Ernest
Symonds, J. B.


Mason, Roy
Prentice, R. E.
Taverne, Dick


Maxwell, Robert
Price, J. T. (Westhoughton)
Taylor, Bernard (Mansfield)


Mayhew, Christopher
Probert, Arthur
Thomas, George (Cardiff, W.)


Mellish, Robert
Pursey, Cmdr. Harry
Thomas, Iorwerth (Rhondda, W.)


Mendelson, J. J.
Randall, Harry
Thomson, George (Dundee, E.)


Mikardo, Ian
Rankin, John
Thornton, Ernest


Millan, Bruce
Redhead, Edward
Tinn, James


Miller, Dr. M. S.
Rees, Merlyn
Tomney, Frank


Milne, Edward (Blyth)
Rhodes, Geoffrey
Tuck, Raphael


Molloy, William
Richard, Ivor
Urwin, T. W.


Monslow, Walter
Roberts, Albert (Normanton)
Varley, Eric G.


Morris, Charles (Openshaw)
Roberts, Goronwy (Caernarvon)
Walden, Brian (All Saints)


Morris, John (Aberavon)
Robertson, John (Paisley)
Walker, Harold (Doncaster)


Mulley, Rt. Hn. Frederick (Sheffield Pk)
Robinson, Rt. Hn. K. (St. Pancras, N.)
Wallace, George


Murray, Albert
Rodgers, William (Stockton)
Warbey, William


Neal, Harold
Rogers, George (Kensington, N.)
Watkins, Tudor


Newens, Stan
Rose, Paul B.
Weitzman, David


Noel-Baker, Francis (Swindon)
Ross, Rt. Hn. William
Wells, William (Walsall, N.)


Noel-Baker, Rt. Hn. Philip (Derby, S.)
Rowland, Christopher
White, Mrs. Eirene


Norwood, Christopher
Sheldon, Robert
Whitlock, William


Oakes, Gordon
Shinwell, Rt. Hn. E.
Wigg, Rt. Hn. George


Ogden, Eric
Shore, Peter (Stepney)
Wilkins, W. A.


O'Malley, Brian
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)
Willey, Rt. Hn. Frederick


Oram, Albert E. (E. Ham, S.)
Short, Mrs. Renée (W'hampton, N. E.)
Williams, Alan (Swansea, W.)


Orbach, Maurice
Silkin, John (Deptford)
Williams, Clifford (Abertillery)


Orme, Stanley
Silkin, S. C. (Camberwell, Dulwich)
Williams, Mrs. Shirley (Hitchin)


Oswald, Thomas
Silverman, Julius (Aston)
Williams, W. T. (Warrington)


Owen, Will
Silverman, Sydney (Nelson)
Willis, George (Edinburgh, E.)


Padley, Walter
Skeffington, Arthur
Wilson, William (Coventry, S.)


Page, Derek (King's Lynn)
Small, William
Winterbottom, R. E.


Paget, R. T.
Snow, Julian
Woodburn, Rt. Hn. A.


Palmer, Arthur
Soskice, Rt. Hn. Sir Frank
Woof, Robert


Pannell, Rt. Hn. Charles
Steele, Thomas (Dunbartonshire, W.)
Wyatt, Woodrow


Pargiter, G. A.
Stewart, Rt. Hn. Michael
Yates, Victor (Ladywood)


Park, Trevor (Derbyshire, S. E.)
Stonehouse, John
Zilliacus, K.


Parker, John
Stones, William



Parkin, B. T.
Strauss, Rt. Hn. G. R. (Vauxhall)
TELLERS FOR THE NOES:


Pavitt, Laurence
Stross, Sir Barnett (Stoke-on-Trent, C.)
Mr. Howie and Mrs. Slater.


Pearson, Arthur (Pontypridd)
Summerskill, Hn. Dr. Shirley

New Clause.—(COMPANIES IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED.)

(1) A company shall not be treated as a close company in any accounting period if 25 per cent. of its ordinary shares as defined in subsection (2) hereof are held on the last day of the accounting period in question by persons who are neither directors of the company nor associates of the participators who control the company and if a class of its shares is quoted in the official list of a recognised Stock Exchange in the United Kingdom on such day or, if no official list has been published on that day, then on the next preceding day on which an official list has been published, and if any shares of the company have been the subject of dealings on such a Stock Exchange in the course of such accounting period.

(2) For the purposes of this section ordinary shares shall mean a class of shares with voting rights not less proportionally than those attaching to any other class of shares of the company and entitling the holders thereof to a dividend other than a dividend at a fixed rate only or at a rate fluctuating only with the standard rate of income tax.—[Mr. Barber.]

Brought up, and read the First time.

Mr. Anthony Barber: I beg to move, That the Clause be read a Second time.
The purpose of this new Clause is in substance the same as that of Amendment No. 362 to Schedule 17 which we moved in Committee and subsequently withdrew. Before I deal with the reasoning behind the new Clause and the details of it, I will try to state as briefly as possible what it purports to do.
The new Clause would exclude from the provisions governing close companies any company in which members of the public are substantially interested—that is, where not less than 25 per cent. of the shares with voting rights are held by the public. It would thus limit the ambit of the close company provisions to the same extent as they are limited under the existing legislation governing what are known as Surtax companies. Nobody who gives consideration to the provisions about the close companies would deny either their importance and stringency or the fact that the Chancellor of the Exchequer intends to bring within the net many great public companies which hitherto have had no fiscal control over their distribution policy.
When I first raised this matter in the early hours of the morning of 23rd June and complained that such an important issue was being debated at such a time, the Chief Secretary observed that it was open to my hon. Friends and I to defer its consideration until the Report stage. I think he mentioned that this had been common practice in the past in certain circumstances. But I remind the House that until the Chief Secretary rose to reply to that Amendment two and a half months after the Chancellor of the Exchequer's Budget statement, we had had no explanation whatsoever of a proposal which, whatever its merits, certainly is of the utmost importance to British industry and commerce. The Chancellor, in his Budget speech, merely said that the existing provisions must be tightened up in a number of respects. But, of course, he is doing far more than that. He is not merely tightening up the existing provisions by putting more stringent provisions in the Bill, but extending very considerably the scope of those special provisions. But at that stage there was not a hint that anything of such a character was forthcoming.
9.0 p.m.
When the Financial Secretary moved the Second Reading of the Bill there was again no explanation. Indeed, after referring to the existing legislation, he said:
We are continuing to apply the same precaution for preventing tax avoidance in relation to this system."—[OFFICIAL REPORT, 10th May, 1965; Vol. 712, c. 54.]
I know that when the Financial Secretary moved the Second Reading of the Bill, he was obviously speaking in general terms and had a great deal of ground to cover. It is, however, surprising that he did not deem this major change of sufficient importance to warrant detailed explanation.
Perhaps the kindest construction to put upon all this, and I do not doubt that it is the true one, is that the Chancellor of the Exchequer and those with him on the Front Bench did not appreciate at the time the importance of what he was doing. This is apparent from the fact that Treasury Ministers seemingly had no idea that a company like British Petroleum was caught and was subject to the same special provisions as the smallest incorporated

family business. In Committee, that was put right as the result of an Amendment put down by one of my hon. Friends.
I mention this background for two reasons; first to stress that I believe quite genuinely that Treasury Ministers did not realise the extent and the importance of what they were doing, and secondly, to show that it was quite reasonable to insist upon an explanation in Committee so that the whole House could consider the Government's explanation before Report.
I want to make two things abundantly clear. I quite recognise, as do my right hon. and hon. Friends, that in the case of small, closely controlled companies, special provisions are necessary to prevent tax avoidance. The Chief Secretary would, however, agree that certain of the tax avoidance devices which are known to the Inland Revenue could have been dealt with without this wholesale extension of the close company provisions to a new category of public companies.
Perhaps I may explain the sort of thing I have in mind. I do not know whether this is the case, but I am told on good authority that there is, apparently, doubt about the voting requirement referred to in Section 256 of the Income Tax Act, 1952. If that is so, it could most certainly have been put right independently of the Chancellor's present proposal. Again, I learned at the end of last week that there is a device whereby the existing provisions in the 1952 Act can be avoided by establishing control of the company in question in an investment company in which 25 per cent. of the shares are held by the public. Obviously, that device also could have been dealt with quite independently. There is a further device involving what, I understand, are known as dividend waivers, which I do not pretend to comprehend in full but which again, on the information which I have, could have been dealt with quite independently. Bearing in mind what I have already said, it must be for the Government to justify the increased powers which they are giving to the Inland Revenue. This most certainly they have not so far done.
Our objections to the extended definition of a close company fall, as the Chief Secretary knows, under two broad heads. First, some of the Inland Revenue's powers over purely commercial and financial matters which form an


integral part of the close company provisions are quite inappropriate for many of our great public companies, which are now, for the first time, to be brought within what I might call the Callaghan net. Let it be remembered that the great majority of British companies are in future to be subject to the close company provisions.
I quite understand the proper desire of the Chancellor—indeed, of any Chancellor of the Exchequer—to prevent avoidance of tax, but there must surely be a limit to the extension of near-penal provisions to cover the case of companies when not even the Chancellor of the Exchequer would suggest that there was either any attempt improperly to avoid tax or any actual tax avoidance. It seems to us that this is just one more instance where, in order to catch the real culprits, the Chancellor is prepared to legislate quite indiscriminately right across the board, with consequences which must be detrimental to sound commercial and industrial enterprise.
I have already made it clear that I am not suggesting that no new provisions are necessary to deal with avoidance devices by public companies, but the Chancellor has ignored completely that in the matter of distribution policy the generality of quoted companies are subject to the discipline of the market and that their object must be to distribute as much as possible with due regard for their current and future requirements. In a laudable attempt to prevent tax avoidance, what the right hon. Gentleman is doing is to subject innumerable companies which have no intention of practising such devices to the same rigours and restrictions as the tax avoiders. We on this side are not prepared to let this legislation pass without full justification, and, so far, that has not been forthcoming.
The second objection, which also in tax matters is a very important one, is that, as a practical matter, I believe that this legislation will be a veritable nightmare to administer. I say that in the light of the reply we had from the Chief Secretary when the earlier Amendment was considered in Committee, and I make no apology for reminding the Chief Secretary of the case which I then put to him. I hope that, as he will now have had time to study it, we shall have a fuller reply,

because this is indicative of the sort of thing which can happen.

Mr. Barnett: I have listened to the right hon. Gentleman very carefully, and I am prepared to consider whether or not to support his Clause, but could he give us an instance of how a close company would suffer under the legislation as amended?

Mr. Barber: It is agreed on all sides that the whole gamut of provisions governing close companies is extremely stringent. We went over this in great detail when dealing with it in Committee.

Mr. Barnett: Which ones?

Mr. Barber: The most important of all, the provisions dealing with distribution policy. It is because these provisions are so important and necessary in the case of a small family business where in the past there has been an attempt at tax avoidance that we do not oppose them for that type of company. All I am saying is that if there is justification for extending the provision in the way the Chancellor seeks to do, no doubt with the best will in the world, the House is entitled to a full justification of it. We did not get it in the Budget speech. We did not get it on Second Reading, although that would have been an appropriate time to deal with it at some length.
Let me give the sort of example which can occur in practice. Take the case of a company where the shares are held as follows: 11 per cent. by "the family" 40 per cent. by four institutional investors, such as an insurance company, banks and so on; and 49 per cent. by 10,000 smallholders who have acquired their shares on the Stock Exchange or on a public offer. The company is therefore under the control of five persons—"the family", treated as one person, and the four institutional investors.
Because the four institutional investors have not got control of the company, the company is not excluded under the provisions of Schedule 17. If the company fails to make what the inspector considers to be a sufficient distribution, the shortfall will be apportioned, with the practical consequence that the inspector will have to obtain particulars of the total incomes not only of the members of the family


but also of each of the 10,000 smallholders. Very few of these will make returns in the district in which the tax inspector is operating. He will therefore have to obtain particulars in each of the 10,000 cases from the respective tax districts, and as I said the other night, there are between 1,000 and 2,000 districts.
I mention this case in detail again because I think that the House should bear in mind the Chief Secretary's comment on that occasion. He did not deny that this ludicrous situation could arise. On the contrary, his only comment was:
. . it will be a situation exactly the same as it is now, which has gone on for years and years under the right hon. Gentleman's own Government under the 25 per cent. for Surtax companies."—[OFFICIAL REPORT, 22nd June, 1965; Vol. 714, c. 1686.]
But even if that were the case, which I shall seek to show in a moment it is not, what a comment from a Treasury spokesman on behalf of a Chancellor who claims to be the greatest tax reformer for half a century! The truth is that there is no comparison whatsover between the situation which has existed for a number of years, and which I concede can cause practical difficulties, and the situation which will arise under the Bill.
The reason is not hard to find. In future, far more companies will fall within the net. What is perhaps much more important, they will be companies with a far wider range of shareholders. Under the existing legislation, the majority of companies which in practice are the subject of a potential Surtax direction have less than 100 shareholders, but now, in what, as I say, is a laudable effort to deal with certain aspects of tax avoidance, the Chancellor is bringing in companies with perhaps 10,000 or more shareholders, and the practical problems are bound to be infinitely greater than they were in the past. It is because of this that it will be impossible for some companies to know whether or not they are close companies.
I hope that the Chief Secretary will tell us this evening how on earth boards of directors are to know who are the beneficial owners of the shares. After all this knowledge is a pre-requisite to the determination of the status of a company, to deciding whether or not it is a close company. Schedule 17 provides, in effect, that nominee shareholdings and share

options shall be treated as the holdings of those beneficially entitled, but the Chief Secretary knows, as do all those who have taken an interest in these matters, that the directors have no right to force those whose names appear on the share register to disclose their beneficial holdings, and I think that we are entitled to an answer on this point. There may be a simple answer. There may be some legislation which empowers directors to ascretain who are the beneficial shareholders, but I do not know of it.
I will not weary the House with a whole string of examples of the ludicrous way in which it can work out, but there is no limit to the complexities which can arise. Let me mention one problem which was put to me only today, though perhaps I might add that there is another good instance which I could pursue, and if necessary bring to the attention of the Chief Secretary. Schedule 17 makes it necessary to look at shareholdings in a parent company if the subsidiary is 100 per cent. owned. If the parent company is a foreign parent, it is necessary, if one is to carry out what is set out in the Bill, to look at the foreign company's share register. In United States law there is no requirement whatsoever for nominee shareholders to disclose the beneficial owner's interest.
I hope that the Chief Secretary will give a clear answer on these genuine points which have been put to him. How are the Inland Revenue, or indeed the directors of the United Kingdom company, in a case such as this, to obtain the information which the Bill makes essential?
9.15 p.m.
I might add in passing that the direct consequence of the provision governing a close company which is a subsidiary of an overseas company is that the close company in this country may well have to distribute to its overseas parent, the overseas holding company, more than it otherwise would have done, and that is an odd way of helping the balance of payments. In the light of what the Chief Secretary says, we shall consider whether we ought to put down an Amendment to Schedule 17 to cover this point.
We on these benches are not wedded to this new Clause, which I quite recognise may well be technically defective.


Nor, in fairness to the Chancellor, are we wedded to the figure of 25 per cent. But if the Chief Secretary agrees that some revision should be made of his right hon. Friend's present proposals, then, as we have raised the matter as a new Clause, it would be open to the Chancellor to amend the Bill by amending Schedule 17, and because we have raised it at this early stage on Report this would not mean that the Bill would have to be recommitted. I mention this because I recognise, in view of the time factor, that the Chancellor may think that a recommittal in present circumstances is undesirable.
So far we have had no adequate explanation of the right hon. Gentleman's proposals and we have had no answers to the sort of practical difficulties which I mentioned when the matter was previously raised in Committee. On the explanation which we have had so far, the extended definition of a close company is bound to hinder the proper commercial development of some of the most important companies in Britain on which our standard of living depends. If we do not receive a better answer this evening, I am afraid that we shall have no alternative but to divide the House.

Mr. Harold Lever: I must confess that I approach the new Clause with mixed feelings. The old system of law was illogical and unsatisfactory. It did not call a close company a close company, but it had its own system of close companies, somewhat different from the present system, but, in principle, not very different.
The approach of the right hon. Member for Altrincham and Sale (Mr. Barber) did not seem to me logical. First, he seems to have fallen into an error which I sometimes detect on this side of the House, but never as manifested by the right hon. Gentleman—a supposition that the Government have something against close companies and that these are dirty words. There is nothing improper about close companies or family businesses or anything of that kind, and I am sure that my right hon. Friend agrees. I am glad that he nods his head. But the right hon. Member for Altrincham and Sale repeatedly circulates the suggestion about family companies being guilty of tax avoidance. The fact that he kept

mentioning this seemed odd, except that I recall that when I was trying to protect these companies from having the onus of proof thrust on them in connection with Surtax directions, the right hon. Gentleman thought that the onus of proof ought to be on the company and not on the Revenue.

Mr. Barber: On that occasion I was trying to be frank with the Committee because I think that in these matters one should be frank. In considering the Chancellor's attitude to family companies I have been influenced by the fact that the Chief Secretary, in a clear intervention when my right hon. Friend was talking about the breaking up of family companies, said, "And about time too". No Treasury Minister has disowned him.

Mr. Lever: That sort of intervention should not be taken seriously. If one seeks to spell out the political philosophy of one's opponents from jocular interventions when one is making a singularly tedious speech, one must be poverty stricken indeed. We must talk about this matter seriously. The right hon. Gentleman has got his premises wrong. What is wrong with being a close company? The right hon. Gentleman is trying to exempt some companies from being close companies. If there is something wrong and unfair in the treatment of close companies, the remedy is to ensure that close companies are not unfairly treated. The remedy is not to seek to extend in an artificial manner the area of public companies so as to include companies which are not truly public companies and whose shareholding is not widely spread among the public. If the right hon. Gentleman has any complaint, it must surely be that he thinks that close companies are unfairly treated.

Mr. Gower: The hon. Gentleman is saying that it is not desirable to extend the area of public companies so as to include companies which are not really public companies. Surely our complaint is that the Chancellor has extended the area of close companies.

Mr. Lever: The right hon. Gentleman is trying to effect a so-called remedy by extending the area of public companies. The Chancellor will ask, as my hon. Friend the Member for Heywood and Royton (Mr. Barnett) very pertinently


asked, what the right hon. Gentleman is complaining about. The right hon. Gentleman said, first, the direction Clause. [HON. MEMBERS: "Only."] As far as I know, he complains only about the direction Clause. No company, close or public, is compellable under our legislation to distribute more than it is reasonably sensible for it to distribute. I will come later to the question whether there is need for this Surtax direction. If I have any complaint about the standard, it is simply that the onus of growth is put upon the company instead of upon the Revenue, where it should be. The right hon. Gentleman, however, is out of court upon this complaint, because he thinks that the onus of proof should be where the Chancellor has put it so that complaint can be left aside.
I come to the single complaint that a close company may be forced to pay more dividend than it wishes to pay. This is what the right hon. Gentleman said. He said that he was afraid that, if a public company of this kind was not given this exemption, it would be subject to a Surtax direction and would be forced to pay more dividend than it wants to pay. It can be forced to pay more dividend than it wants to pay only if it seeks to retain more than is reasonably necessary for the purposes of the business.
The only reason that public companies are given an exemption from Surtax direction is because in the past it has been assumed that the extent of public interest will be sufficient to ensure that what is considered to be a full and reasonable distribution of the profits will take place. This may very well be a not unfair, though a very rough and general, assumption, namely, that where there is a widespread public shareholding—that is, where the public controls the company effectively—the Revenue has been willing to assume that if the board of directors or the controlling influence in the company sought to accumulate the profits instead of to distribute them the average small shareholder, or even the average big institutional shareholder not liable to Surtax, would bring pressure to bear upon the company and force a more liberal distribution. This was important from the Surtax point of view hitherto. It is particularly important now, from

an Income Tax as well as from a Surtax point of view, and from the point of view of preserving the revenue, that a fairly reasonable distribution should be made.
Therefore, the Revenue is entitled to have another look at the terms of exemption of quoted companies. The right hon. Gentleman says that the old terms will do, that a 25 per cent. shareholding should be enough. I do not think this is so. I think that, if this system is to be run, the only justification for exempting public companies is that they are subject to such popular pressure, should they pay small dividends, that they will have to pay a reasonable dividend.
It is no answer to say that this might be troublesome to the Revenue in certain cases. I should have thought that that was a cause for comfort rather than a cause for anxiety, because if it is exceedingly troublesome for the Revenue to discover thousands of shareholders and to assess their respective Surtax and Income Tax levels, involving an immense amount of administrative work, this would greatly discourage the Revenue from seeking to impose the Surtax direction upon the kind of companies that the right hon. Gentleman is afraid will be subject to a Surtax direction, except in the most glaring case of inadequate distribution. The Inspector of Taxes, for the purpose of saving his own administrative fatigue, will be forced to let anything on the borderline go. In those circumstances, I do not think there is a remedy in the kind of niceties that the right hon. Gentleman has suggested for dealing with the question of inadequate distribution.
I should like to say a word about the future. If the Clause is not the right remedy—that is to say, if some companies shall be exempt and others shall be liable—Surtax direction is also not the right remedy, and I hope we shall go on from here. There still remains to be explained the odd paradox of saying that in the case of I.C.I. it is a splendid thing if the company pays practically no dividend, on the ground that there are innumerable shareholders, notwithstanding the fact that none of the shareholders pays tax on non-distributed profits and will pay no tax under the new dispensation, but that it is a bad thing in the case of family companies. I do not see the point. I do not


see why, if a man invests his money in a family company, it should be more sinful to plough back the profits in order to build up his capital than when it is done for him when he invests in the Legal and General Assurance Society Ltd. or in I.C.I.
The whole thing is a paradox and is illogical. The paradox has got to be tackled at its root, and not in the manner suggested by the right hon. Gentleman. The root may very well be to abolish the whole need for Surtax direction. All one need do to abolish the whole power of Surtax direction on companies, close or open, is to ensure that the shareholder shall not have access to the use of assets except by means of dividends or by some means which makes one pay the appropriate amount of tax. Once we have that system whereby the shareholder cannot touch the assets of the company or enjoy them or spend them or make use of them except when he receives them by way of dividend or by way of realisation of his shares—

Mr. Geoffrey Lloyd: The hon. Gentleman is referring to investment trusts?

Mr. Lever: I am referring to an analogous system whereby a beneficiary under the settlement of a trust, a settlor, ceases to be regarded as a non-beneficiary. The income is deemed still to be his. We are moving in that direction. The Chancellor has moved a good deal of the way towards it. It may be that some of the hardship will be mitigated at the next stage when the Chancellor may indicate the abolition of the whole system of Surtax direction. When he has completed the task of ensuring that what is ploughed back into a company cannot be enjoyed in the same manner as a dividend is enjoyed by a shareholder, or borrowed or manoeuvred by a shareholder without attracting tax, then we shall have moved to a modern system of taxation.

Mr. Graham Page: I intervene because there is on the Notice Paper an Amendment in my name, Amendment No. 277, to Schedule 17, in page 216, line 5, at end insert:
(4) A Company is not to be treated as a close company if the public are substantially interested in it and the public shall be deemed to be substantially interested in a company if shares of the company (not being shares entitled to a fixed rate of dividend and without a further right to participate in profits) which:


(a) carry not less than 25 per cent. of the voting power of the Company, and
(b) would, if the whole income of the company were in fact distributed to the members, entitle the holders theréof to receive not less than 25 per cent. of the amount so distributed, and
(c) would, on a winding up entitle the holders thereof to receive not less than 25 per cent. of the assets of the company

and at the end of the accounting period mentioned in Part II of this Schedule beneficially held by the public and each class of such shares have in the course of such accounting period been quoted in an official list of a Stock Exchange in the United Kingdom and been the subject of dealings thereon Provided that the expression "the public" for this purpose shall not include any associated company nor the directors of the Company or the five participators (other than companies which are not close companies) whose respective holdings, together with the holdings of their respective associates, represent the five largest interests in the capital or income of the Company computed as provided in paragraph 3 hereof, or any associates of such participators.
The Amendment has not been selected, Mr. Deputy-Speaker, and, therefore, I do not intend to debate it in any way. I merely call attention to it as being a convenient summary in print of my comments on new Clause No. 35, of my qualified support for this Clause—my support in principle, if qualified in detail, as to the place that it should take in the Bill.
My right hon. Friend has explained clearly the immense difficulties in applying close company provisions to the substantially publicly-owned companies. He has explained the serious hindrance that these restrictions will cause to many of the greatest undertakings in the country—restrictions which are unnecessary to avoid abuse.
9.30 p.m.
The Surtax directions, which is a convenient way of referring to these restrictions, were surely applicable to companies not effectively under public control. I should have thought that it must be generally agreed that the company in which the public has a substantial interest should not come within the close company provisions and that the real debate is on whether we can describe that company so that abuse does not come or escape does not come from the way in which we describe it.
Can we describe in a Clause what we mean by the substantial interest of the


public? First, can we describe "substantial" and secondly can be describe "the public"? Unless we can define these specifically there will perhaps be so much abuse that the relief would be impracticable to define, because so frequently in taxation one cannot do what one wants to do because one cannot frame the appropriate Clause to prevent the benefit being given to those who do not deserve consideration.
But I think that we can here describe exactly what is meant by a company in which the public has a substantial interest, and the new Clause goes a great way in describing that in detail and pluging up any holes which there may be in that definition. The limiting factors necessary for plugging up the holes are considerations that the shares concerned must not have a fixed rate of dividend, they must carry not less than 25 per cent. of the voting power of a company, and the shareholders must be entitled to a distribution of not less than 25 per cent. of the amount distributed and, on winding up, must be entitled to not less than 25 per cent. of the assets.

Mr. Deputy-Speaker (Dr. Horace King): Order. The hon. Member is getting perilously near describing his own Amendment No. 277 which is not selected.

Mr. Graham Page: Although I have that page open in front of me these are provisions which appear in new Clause No. 35 but, as I said, that Clause does not go far enough to my mind in the definition of what is meant by "a substantial interest" and what is meant by "the public".

Mr. Deputy-Speaker: The hon. Gentleman can criticise what is in Clause No. 35 but he cannot replace it by his own Amendment No. 277. That Amendment may be selected ultimately, in which case the hon. Gentleman will have a chance of talking about it. On the other hand, it may not be selected, in which case it is not in order for him to talk about it now.

Mr. Graham Page: I will confine myself strictly to what is in new Clause No. 35 and comment on that in so far as I think it adequate or inadequate. The new

Clause contains the expression "25 per cent. of its ordinary shares" and that figure is to be judged as on the last day of the accounting period, and it refers to the voting rights of those shares—the point to which I was previously referring. But to the extent which I mentioned earlier I do not think that it defines that voting right clearly enough.
The new Clause defines what is meant by the public as not the directors of the company nor the associates of the participators. It says that shares must be quoted on the Stock Exchange and that there must have been dealings on the Stock Exchange during the accounting period. These are definite descriptions of what is meant by the public having a substantial interest in the company and therefore it is practical to define this type of company so that one can exclude it from the close company provisions. This is what new Clause No. 35 is intended to do. If accepted by the Government, it would benefit some of the greatest undertakings on which we rely but which will be hindered by the provisions affecting close companies if they are left to apply to that sort of undertaking.

Sir Henry d'Avigdor-Goldsmid: Many hon. Members will be grateful to the Chair for a selection which has made it possible for this important new Clause to be debated at a time when a number of hon. Members can be present and when, perhaps, their faculties are not affected by lack of sleep. It is a particularly important Clause, because it brings into our consideration not only the actual companies concerned, whose number is very large, but the whole structure of industry and commerce in this country.
It is now fashionable to declare an interest, or to have an interest declared for one, and perhaps I had better make clear that I speak as chairman of a bank which is not a close company but am also a director of a close company. I propose, therefore, to direct my remarks entirely to the area where I have no interest whatever, and the considerations which I shall bring out will be those applying to banks which are close companies.
I thought that the hon. Member for Manchester, Cheetham (Mr. Harold Lever) had not applied himself with his


usual perspicacity to this Clause inasmuch as he seemed to suggest that no particular inconvenience was suffered by companies being close companies.

Mr. Harold Lever: I did not say that. I said that, if it were true that making a company a close company would handicap it seriously in its commercial and financial activities the remedy was not to extend the area of non-close companies, but to remove the handicaps because close companies are entitled to have as much commercial and financial opportunity as any other company in the land.

Sir H. d'Avigdor-Goldsmid: The hon. Gentleman is kind enough to help me make my speech and I am very grateful. Unfortunately, we are addressing our minds to a Clause which seeks to widen the sphere of public companies and narrow the sphere of close companies. However much I may applaud the hon. Gentleman's remarks I feel that I should be out of order if I were to follow him. I shall address myself to the Clause which is before us.
The first and major disadvantage—I am speaking now of the banking world—is that there is an active discouragement to people to have their money in their own bank. In my youth, one preferred to do business with people who had their money in their own business.

Mr. Harold Lever: indicated assent.

Sir H. d'Avigdor-Goldsmid: I see that the hon. Gentleman nods approval. This is a prejudice which exists in many countries. One feels slightly more encouragement to do business with an institution which has the benefit of the fortunes of its founders rather than one which is an entirely public company in which the shareholders are, perhaps, in no position to protect their interests until long after they have suffered.
This is an important point. As the Chief Secretary knows, a participator in a bank is actively discouraged from having any of his own money in it. The fact that he has his own money in it disqualifies him from being a whole-time working director. He is disqualified from being a whole-time working director if, directly or indirectly, he has as much as a 5 per cent. interest. That appears plainly in the Schedule. It means that

no man will wish to put or invest his funds in the business he is running himself. Why?—because he is a participator, and he is limited in his earnings to the sum of £3,500 if he is chairman or £2,500 otherwise. Equally, there are certain advantages of residence and what used to be known as fringe benefits which he is completely barred from enjoying. If he is a whole-time working director in somebody else's business, he gets them, but if he is a whole-time working director in his own business, he does not.
This is not mere fancy. I am talking about banks, and banks make their name by being reliable and responsible, and the best guarantee of responsibility is that people know that the family's own money is in it. This is a real point, but this is something which is actively discouraged by the provisions of the Bill. [Interruption.] The hon. Member for Cheetham has made several speeches on his feet, and now he seems to make one from a sitting position. I am addressing myself to the narrow point. There is an important national interest here. I know that the word "bank" is regarded with odium, but the fact is that the banks about which I am talking, which are close companies, have added a great deal to our foreign exchange earnings.
Over the last two years there have been floated in the City of London a very large number of loans for abroad which have used not a penny of British capital because they have been floated in dollars. It is a particular triumph for the ability of the City of London that the great £50 million pipeline which is reaching across Europe has been granted to a British consortium which did not invest a penny in it. It invested its "know-how" and skills, and this investment enables it to earn a very substantial commission directly for this country and also indirectly in the expenditure of the actual pipeline.
The institutions which carried this out are just the institutions which by these close company provisions are being invited to lose their standing. There is no doubt that their standing depends as much on the family fortunes which are engaged with them as on the actual balance sheet capital which they show. After the Bill becomes an Act, their legal


advisers will tell the families that they are wrong to keep their money in their own bank because they will be penalised thereby. It will be said abroad that because of British legislation those families have had to take their money out of their own businesses and put it elsewhere.
I am not inventing. I am speaking from direct personal knowledge of the way people talk and think. Is it sensible that that sort of thing should happen? Is it in the national interest that such skill and expertness should, through some of the rougher provisions of this close company legislation cause important British interests to lose their standing? My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) made what might sound a fanciful suggestion, that one might have an institution in which the family had 11 per cent. interest and 40 per cent. was held as to 10 per cent. each by four important public companies, which would result in the business being a close company.
9.45 p.m.
I can give the Government particulars of one of the three or four largest merchant banks in this country which is 69 per cent. publicly owned. It has 17,000 public shareholders, but it is caught as a close company. What is its position? The family, obviously, will be advised that it is wrong for it to keep its money in that bank because the interest will be penalised and, furthermore, that the chairman will never be allowed to consider more than £3,500 of his earnings as earned income. This is really silly. One does not get people capable of being chairmen of important public companies of this size unless they are worth an earned income of rather more than £3,500.

Mr. Eric Lubbock: Sometimes one has to pay them £270,000.

Sir H. d'Avigdor-Goldsmid: That characteristic intervention from the hon. Member shows that he does not know the difference between a public company and a close company. I am talking about a close company in banking—a subject of which his father had a great deal of knowledge It is a pity that the father did not have a chance of passing it on to his son.
I am entitled to ask the Chief Secretary whether he intends what he said concerning the close company provisions in so far as they apply to a number of international institutions which are earning for this country and whose standing and earning ability will be damaged if these provisions go through without amendment. I hope that I shall be forgiven for dwelling on the narrow rather than the wider point, but it is important and I hope that the right hon. Gentleman will answer it.

Mr. Barnett: As hon. Members will know, I do not like penal taxation, but I do not think that the right hon. Member for Altrincham and Sale (Mr. Barber) made a case for his claim that the effect on close companies which he is attempting to remove from the net will be penal. Indeed, his argument was somewhat perverted. He stood it on its head.
What are the disadvantages for close companies as defined by the Bill? I intervened to ask the right hon. Gentleman and the only disadvantage he could give concerned compulsory distribution. Now the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) has talked about the remuneration of directors. Amendments that have been made to the Bill now allow for large companies with larger profits up to 15 per cent. of profits as directors' remuneration, and I am hoping for even greater concessions when we discuss smaller companies.
The only other penal effect on close companies was that of loan interest as previously defined. This has been conceded and the right hon. Gentleman did not feel it necessary or important or penal enough to mention it now, although there is still some of the old provision left. The only example the right hon. Gentleman gave was that regarding compulsory distribution.
When dealing with an attempt like this to stop a form of tax avoidance—and I do not think that any hon. Member would dispute that that is the intention—and when we are considering whether we should effect a law which will prevent the avoidance of taxation in any way, we should ask ourselves whether it will hurt people more than it will help the Revenue.
If I thought that this would have such a penal effect as to hurt a large number of people I would say, "Let us have a little avoidance", but no hon. Member


has yet proved to me that the penal effect of this stopping of Surtax avoidance is such as to warrant the inclusion of the Clause, because the maximum distribution of trading profits, assuming a Corporation Tax rate of 40 per cent., would be 36 per cent.
If that is penal, hon. Members opposite are now arguing a rather different case from what they have argued previously when they have said that we should do everything possible to encourage distribution. Their argument has been that the effect of the Bill will be to discourage distribution and that the Bill should have been so framed as positively to encourage distribution so that it would then come back in the form of new equity.
We now have a situation in which the most a closed company will be compelled to distribute will be 36 per cent. Providing that a company could show without too much difficulty—and from my experience it is not difficult to show—that it was ploughing back profits for use in the company, even in years ahead, it would not have to pay a penny in dividends. If the effect of the tax on close companies as now defined and including those which hon. Members opposite wish to exclude is not so terribly severe, what is the purpose of the new Clause?
Surely it must be accepted that in many cases the sole purpose of retaining, as opposed to ploughing back, profits is to avoid Surtax. Hon. Members opposite are now taking the heart out of the argument of the right hon. Member for Bexley (Mr. Heath) about the survival of the fattest, because that is precisely what they are now proposing. They are now saying that we should give every possible encouragement to those companies now defined as close companies to retain, as opposed to ploughing back, profits; in other words, allow the fattest to survive.
One can only assume that the right hon. Gentleman has put on some weight since the start of our discussions of the Bill some months ago, but it should be made clear to the House and the country, that those companies, close or otherwise, which wish to encourage growth and which are ploughing back profits rather than retaining them to avoid Surtax have every encouragement to do so and will pay less tax for so doing.

Mr. A. P. Costain: I wish to support the Clause merely by declaring my interest. I am a director of a close company of which I hold 98 per cent., a director of a close company of which I own a majority and a director of a public company. I do not have a clue whether it is a close company or not. Its shares are dealt with in some of the world's stock exchanges and at one moment it may be a close company and at another not.
I support the Clause because I do not see why someone dealing in shares in Australia should be able to affect the taxation position in this country. The Clause is designed purely to put some sense into a provision designed only to take every possible step to stop tax evasion and which goes so far that it will stop normal business.

Mr. W. R. van Straubenzee: I think that there are two answers to the well-argued case put to the House by the Member for Heywood and Royton (Mr. Barnett), which ought to be answered, because the House is accustomed to his arguments being backed by considerable experience. The first answer, and I think that this was demonstrably shown by my right hon. Friend the Member for Altrincham and Sale (Mr. Barber), when the Bill was first drafted and presented to the House, is that it was not appreciated that it affected so wide a range and number of companies as it is now shown to affect. It is this which this Clause seeks to rectify.
As additional evidence of that I take the example given by the hon. Gentleman the Member for Heywood and Royton himself. The upper limits of remuneration in Clause 69(1) would never have been so full if the other effects of this Clause had been appreciated in the first place. It is all very well, if I may say so in a friendly way, to say that as a result of pressure "we have now got changes". It is as a result of pressure from this side of the House that we got the change, and that had better go quite firmly on the record.
The second answer to the hon. Gentleman the Member for Heywood and Royton is that the primary reason behind the rejection, if it be so, of this Clause, is the absolute rooted preoccupation of the Treasury benchers with tax avoidance.

The Assistant Postmaster-General (Mr. Joseph Slater): Hear, hear.

Mr. van Straubenzee: The hon. Gentleman has taken a very active part in our proceedings. That is the sort of speech which I am sure his own Front Bench welcomes.
The right hon. Gentleman the Chief Secretary, speaking when we last debated this matter, said the reasons for these provisions were perfectly simple, that
… the need to protect the Revenue is greater now than it was before …."—[OFFICIAL REPORT, 22nd June, 1965; Vol. 715, c. 1685.]
There have been schemes by which closely controlled companies have avoided their proper taxation. My right hon. Friend the Member for Altrincham and Sale showed exactly that correct measure of discretion, and indicated that he clearly understood at least three of them, but went no further than was necessary to convey to the Treasury Bench that he understood what was in their minds.
It is conceded that this is a power which is proper and requisite in the hands of the Treasury. But this absolute preoccupation, this feeling, particularly now that larger companies are in the net, that they are busily engaged in the business of tax avoidance and that there is need for these massive powers—this is not in tune with the realism of business life.
An interesting example of this type of thinking is given in a paper of which some hon. Gentlemen may have heard, called the New Statesman. It is a paper which I only read on those useful occasions when I do not have to pay for it. In an issue of it there is an article by Mr. Michael Posner, who is an intelligent young economist, close to at least one of the authors of the Bill He described my hon. Friends, and possibly even myself—those of us who have interested ourselves in this section of the Bill—as "an ugly lobby of the tax avoiders".
I do not suppose that he used the word "ugly" in relation to my hon. Friends in a physical sense, because no one could conceivably apply that to my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), and my hon. Friend the Member for Belfast, North (Mr. Stratton Mills), though possibly it could be applied to myself. [HON. MEMBERS: "Oh."] I trust that HANSARD will record

those cries of dissent. To think that anybody can describe the efforts to improve these unthought out provisions—and, by Heavens, the improvement is shown on the Notice Paper—as "an ugly lobby"! What a revealing expression this is. This is the basic thinking behind the new provision the effect of which the new Clause seeks to alleviate. This is the second answer to the hon. Gentleman.
10.0 p.m.
The object of the close company provisions is the greater supervision and control of what I might loosely call the everyday affairs of a very substantial number of companies which are public companies in the minds of ordinary members of the public. I am well aware of what I think are some of the most hopeful words ever recorded in HANSARD by any Minister.
On 22nd June, the Chief Secretary said:
There are no major difficulties"—
he told us blandly—
whatever for the company which finds itself a close corporation. If it is concerned to expand its business, not to avoid tax in the way indicated, it will have my right hon. Friend's full support and encouragement"—[OFFICIAL REPORT, 22nd June, 1965; Vol. 714, c. 1686.]
In future years, when the right hon. Gentleman is in private practice, we shall remind him of those words until he winces. What he forgets is that Ministers and Governments come and go but that Treasury officials remain.
I accept the good intent of the Chief Secretary and the Chancellor of the Exchequer, but Treasury officials are not affected by words in HANSARD. They are concerned only with the words which we write in a Bill; and the Bill will be a better Bill if we write in the words of the new Clause.

Mr. Stratton Mills: My hon. Friend the Member for Wokingham (Mr. van Straubenzee) spoke about accepting the good intent of the Treasury Bench and their attitude towards close companies. I am sorry to disagree with him, because I am not prepared to accept it. I wish to make two points.
It is clear that the Government's attitude to close companies is one of basic hostility, for two reasons. First, their basic attitude is to prefer the larger company and to base their arguments on the larger company being more dynamic and


having a greater growth potential and the smaller company being potentially more inefficient. This is a basic simplification of the situation.
Secondly, in preparing his economic plans, and in the various other activities which he gets up to between weekends, I think that the First Secretary prefers always to deal with the large company. He can rap his desk and get the chairman of the large company to come along. He can invite him to lunch, or make a speech at him or suggest honours to come. But the Government do not care a twopenny damn about the small man, who is concerned with looking after his business and improving its position. I make those purely preliminary remarks on the Government's attitude to small close companies.
My hon. Friend the Member for Wokingham quoted some revealing parts of the Chief Secretary's speech on 22nd June. If he were to refer to col. 1867 of the OFFICIAL REPORT for that date. he would see expressed in seven lines the Treasury attitude to the 25 per cent. public participation provision. I do not propose to read what the right hon. Gentleman said, but the argument basically was that this has been used as a method of tax avoidance. I ask the Chief Secretary, when he winds up, to outline the specific points of tax avoidance which are troubling the Revenue and to say clearly why it is impossible to deal with them by amendment of the existing legislation rather than by this broad, blanket provision. That is the crucial point in this debate and I hope that the right hon. Gentleman will be able to deal with it.
A further point which I want to make concerns the practical effects on public companies which, having quotations in recent years, have sold off 25 per cent. of their equity to the public. They will now be faced with having to sell off a further 25 per cent. of their equity or accepting the penal provisions of the Bill, which my hon. Friend the Member for Wokingham and my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) have outlined. To sell off another 25 per cent. of the equity creates great problems, because it cannot be done by an offer for sale, as may have been done originally, or by placing, but presumably it will have to be done

through the market. The Government's economic activity has not really made the Stock Exchange much stronger.
This type of small company has a narrow market for its shares. I imagine that one could sell £10,000, £20,000 or £30,000 of I.C.I. shares in a day and not affect the market, but in the case of a small company with a market value of £200,000, to sell £50,000 worth of shares over the course of a couple of months would seriously affect the market price. My other point under this heading is that the family have to agree among themselves who is to sell the shares and the 25 per cent. of the capital. This is a difficult point. The share capital may well be spread throughout a number of different branches of the family and it would be necessary to go into the problem of who is to sell and who is not.
I return to the point with which I began. The Chief Secretary is the most reasonable of men and cannot fail to have been impressed by the arguments which he has heard tonight. Before we consider Schedule 17, he has the chance to put down a Government Amendment. He may not be able to make a clear announcement tonight, but if he would undertake before we reach Schedule 17 to consult Mr. Kaldor, that would go a long way to meet our point.

Mr. Diamond: Whether I am reasonable is for the House to say. I am anxious to try to understand why this curious idea of a stigma seems to have grown up with regard to close companies. There is no stigma in referring to a company as a public company or a private company. It is merely a description of the way in which shares are held. It is neither good nor bad, neither pejorative nor the reverse. It is simply a description. I am sorry to have stimulated the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) already.

Sir H. d'Avigdor-Goldsmid: If the right hon. Gentleman wants to know why it is pejorative, I have only to call his attention to Clause 69, which limits the amount which close companies can deduct for directors' remuneration, to Clause 70, which stops up a device under which close companies obtain tax benefits in respect of certain loans, to Clause 72, which concerns the shortfall in distributions by a close company with Income Tax at the


standard rate, and Clause 73, which provides for the apportionment for Surtax of a close company's income. If the right hon. Gentleman wants to know why it is pejorative, he gets the answer from his own Bill. Why peer into the crystal when one can read the book?

Mr. Diamond: I repeat, I fail to understand why a stigma has become attached to a description of a company which merely relates to the manner in which its shares are held. The hon. Gentleman himself referred to the phrase "a family company" with benevolence. He thought a family company was something which in banking terms might carry strength and confidence, and I share that view. There is nothing wrong in calling a company a family company and, by and large, a family company would be a close corporation. Perhaps the hon. Gentleman would prefer us to alter the name. We will not get very far with the problem unless we remove the suspicion with which right hon. and hon. Gentlemen are approaching it.
It is accepted on all sides—and the right hon. Gentleman the Member for Altrincham and Sale (Mr. Barber) started on this—that our tax system at present is such as to protect those who play the game in their tax affairs and to protect the honest and fair taxpayer. It is necessary to see that tax avoidance does not take place through income which is really the income of a proprietor and should be taxed as part of his income and subject to Income Tax at the present time. It must not be so dealt with as to avoid a fair measure of taxation.
This is common ground between both sides, and the right hon. Gentleman who opened the debate said he recognised that the present system, which for shorthand purposes I will refer to as "the Surtax provisions"—the Surtax direction and the Surtax company—was necessary, because otherwise there were clearly opportunities for large-scale tax avoidance, which means opportunities for certain people to avoid paying their fair share and therefore for other people to be called upon to pay more than their fair share.
If the Treasury and the Government and, indeed, the whole House do not have the responsibility of seeing that everyone pays his fair share of tax, I

do not know why we are here. We are taxing the public. Surely it is our duty to see that we tax people in such a way that everyone pays his fair share, and the right hon. Gentleman recognises that under the present system it is necessary to have what we call the Surtax provisions dealing with "the Surtax companies".
It is true, as the hon. Gentleman the Member for Wokingham (Mr. van Straubenzee) said, that under the new system there will be a greater incentive to avoid tax in this way. It is true that under the new system we want to encourage firms either to plough back and use the money they have made in the development of their industry, if necessary up to 100 per cent. of their profits so that not one penny need be declared in dividend, or to declare dividends, but not to sit idly on their resources and, as the right hon. Gentleman said in an earlier debate, grow fat on them.
For these two reasons, therefore, it is necessary that the protection which the fair-minded taxpayer had should remain or be increased. But the proposal which the right hon. Gentleman is putting before us, and which has been supported by a number of speeches, is that the present protection should be mightily reduced; that whereas, at the moment, there is some incentive to tax avoidance which will be greater under Corporation Tax, the protection should be reduced.
That is wholly illogical. It will be vastly reduced, because the proposal deliberately uses words—I say "deliberately", because the right hon. Gentleman referred to them—which make the proposed protection much less than the present protection. It will not surprise the House, therefore, that I could not possibly recommend the acceptance of this Clause.
10.15 p.m.
There are other Clauses and other Amendments which seek to do different things, but what this Clause seeks to do is to reduce the present protection. It seeks to do it in a particular way, namely, by removing the word "beneficial" from the ownership of the shares. This means that it will be possible to drive a coach and horses through the anti-avoidance devices which exist. I said that I was sure the right hon. Gentleman


had deliberately left out the word "beneficial" because a good deal of his speech was devoted to the difficulty of determining whether a beneficial shareholder was a nominee of some other shareholder.

Mr. Barber: Whatever may be the terminology of the proposed Clause, it was not our intention to provide fewer safeguards for the Revenue than existed before. I thought that I had made that clear. Indeed, I thought that I had made it clear that in my opinion there was no substantial difference between this Clause and the new Clause which we considered in the middle of the night in Committee.
Having made that point, may I say that if the right hon. Gentleman wishes to amend Schedule 17 to restore the position to that which existed before the Bill was introduced, we would be happy to accept his Amendment.

Mr. Diamond: Then there is very little more for me to say. I do not know whether the House would like me to go through the four major ways in which the proposal is less protective than the existing Surtax provisions. I have mentioned only one because the right hon. Gentleman dealt at length with the problem of ascertaining beneficial share ownership. However, if he agrees that in the new circumstances it would be wrong to introduce a protective measure which was less protective than the existing one, I do not think that I need detain the House long at all, because there will be other opportunities for discussing other proposals which it would not be in order for me to anticipate.
There is one thing to which I must refer, and that is the right hon. Gentleman's repeat performance—I do not use the words discourteously—perhaps I might say his repeated reference, to the difficulty of ascertaining whether a shareholder is a beneficial shareholder or not. The hon. Gentleman described a company in which he is interested and said that he had not the foggiest idea whether the shares were beneficially held, or who held them. I hope that he will consult his right hon. Friend, who will tell him that this is a situation which existed hitherto, and has done for many years, because the present limitations are based on a 25 per cent. holding by the public.

Mr. Barber: indicated dissent.

Mr. Diamond: The right hon. Gentleman shakes his head. I hope that he will tell me in what respect I am wrong.

Mr. Barber: I was called out of the Chamber a few minutes ago to receive what I thought was an urgent telephone call. It was, in fact, a call from somebody who is closely concerned with a highly reputable merchant bank. He tells me that he has more than 15,000 shareholders and that, having taken the best possible advice, the position is that without the most meticulous examination of the share register it is not possible to decide whether or not it is a close company. This sort of thing never arose before.

Mr. Diamond: The right hon. Gentleman must not say that this sort of thing never arose before, because it is the situation which exists now, even as I am speaking, and as the right hon. Gentleman is sitting there. The present position provides for exclusion from the Surtax provisions if 25 per cent. of the shares are held by the public. One first wants to find out whether the shares are held by a bank, whether Mr. Smith is a shareholder, whether X Bank Ltd. or its nominees are shareholders, and so on. The situation about which the right hon. Gentleman was complaining exists at this very moment.
The right hon. Gentleman does me the courtesy of reading what I say and quoting it from time to time. I hope, therefore, that he will be a little more careful to put my remarks in context. This is the second occasion on which he has not done so. In his quotation tonight the right hon. Gentleman put an answer of mine against a question which it was not answering. What I said is absolutely clear, and it is rather unfortunate that the right hon. Gentleman tried to tie an answer of mine to something which was totally different. As reported in c. 1686, I said:
The right hon. Gentleman now produces a new argument and says that our proposal will not work, that there will be a ridiculous situation on the Stock Exchange where, completely outside the control of the company, shares will be bought and sold on the public market and directors will not know from day to day whether control is so placed that they are a close corporation. In short, of course,


it will be a situation exactly the same as it is now …".—[OFFICIAL REPORT, 22nd June, 1965; Vol. 714, c. 1686.]
I said that the situation will be exactly the same as it is now. The right hon. Gentleman quoted my remarks very much out of context, but we do not want to waste time on that.

Mr. Patrick Jenkin: Will not the Chief Secretary recognise that the major change effected by the exclusion from the Bill of any provision dealing with public companies is that in future all companies which are or could be controlled by five or fewer persons will have to be scrutinised for the purposes of this part of the Bill, however many thousands of shareholders they may have? In the present situation it is in the highest degree unlikely that one would ever consider for the purpose of Section 245 a company which had as many as 100 shareholders.
Will the right hon. Gentleman accept that practitioners in this field—and I have consulted them on this point—say that it is extremely improbable that they would ever have had to offer advice to a company on Surtax direction which had more than 100 shareholders? This is the major difference.

Mr. Diamond: The hon. Member is making a totally different point. I hope that he will accept it from me that it is a different point, otherwise I shall have to say that it is totally irrelevant when looking at the Clause which we are discussing. The Clause provides for the same 25 per cent. except, as I repeat, that it excludes beneficial ownership and, therefore, anybody can own the shares. It refers to registration on one day in the year, which can easily be avoided.
I repeat that it does not follow that if we had not introduced Corporation Tax we should not have been dealing with this avoidance device and we should not have had to look at the 25 per cent. limitation. The 25 per cent. limitation, which was a method of exempting from Surtax that category, did not work, and it did not work at the time the right hon. Gentleman was a Treasury Minister. We should have had to give close attention to the matter and we should have had to remove that exemption. It does not follow that the problem would have been discussed

in the present form. Suffice it to say that although the new Corporation Tax will increase the incentive to tax avoidance, we have a new Clause which proposes to reduce the limitation and to give greater opportunity for avoidance. I cannot possibly recommend it to the House.

Mr. William Clark: The whole debate on the new Clause has revolved around the difference between the old Section 245 Surtax and the new so-called close company. The Chief Secretary made great point about a suggestion which he said had been made that there was a stigma on a close company, but none of my hon. Friends made such a point. They were pointing to the penal effect of Corporation Tax for a close company.
As my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) said in a very adequate intervention, what the close company definition now does is to include a much bigger range of shareholders. No matter what the Chief Secretary says, this is the position. The Chief Secretary argues that with the old Section 245 company there was a certain amount of tax avoidance and there were difficulties in relation to whether a company was 25 per cent. publicly owned. There will be precisely the same difficulties with close companies in relation to Corporation Tax.
The Chief Secretary, as my hon. Friends the Members for Wokingham (Mr. van Straubenzee) and Belfast, North (Mr. Stratton Mills) have said, has not dealt with the question of how the close company provisions will affect small companies. Some hon. Members opposite, particularly the hon. Members for Heywood and Royton (Mr. Barnett) and Manchester, Cheetham (Mr. Harold Lever) have pointed out that there is no question of there being any penal effects on close companies, particularly with regard to distribution, because there is the loophole that, if a company wants to retain its profits, the 60 per cent. distribution need not necessarily apply. There is the whole concept under the Bill of a close company as compared with the old Section 245 Surtax company. We have not as yet mentioned the question of participators, the question of loan interest, or some of the charges which are not


allowed. This gives a completely new concept to the effect of close companies.
It was wrong of the hon. Member for Heywood and Royton to accuse my right hon. Friend for Altrincham and Sale (Mr. Barber) of dealing only with the distribution element. My right hon. Friend pointed out the penal effects, not only on distribution. He certainly mentioned distribution, but he dealt with the whole new concept of what a close company means.

Mr. Harold Lever: My whole speech was directed to saying that in so far as close companies were under penal difficulty, the Clause would remedy those difficulties only for the larger companies, namely, those quoted on the Stock Exchange.

Mr. Clark: I intend to come to that point. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) made a very valid point, which the Chief Secretary made no attempt to answer. That is the question of merchant bankers. It was coincidental that my right hon. Friend the Member for Altrincham and Sale received similar information from a different company over the telephone during the debate. I am certain that, when in moving the Clause my right hon. Friend said that those on the Government Benches did not understand the effect of close companies, he under-estimated the position. I am certain that the Government were staggered at the effects that their close company provisions had on close companies. It is all very well for the Chief Secretary to nod his head. I can assure him from personal experience that this is the position. People are staggered at what the implications of close companies are.
The Chief Secretary rightly spoke about tax avoidance. It is accepted in all parts of the House that nobody wants either to allow tax avoidance or to increase it. All of us have one object in mind, which is to close any tax loophole there may be. What I could not understand about the Chief Secretary's speech was that he said that as to tax avoidance what we must do is to ensure that the income of the close company is the income of the proprietors of the close company. I was very careful to write down what the Chief Secretary said. I hope that he will study HANSARD in the morning. He said that the income should be treated as the income

of the proprietors. We moved a similar Amendment in Committee, when we said that a company which is a close company should not pay any more tax than a partnership. What I cannot understand is that the Government then said that we could not have it this way and that it would not do.
The Chief Secretary and his colleagues on the Treasury Bench are obsessed with the fear of tax avoidance. There is no need to catch all the fish just to ensure the apprehension of one devious sprat. This is what the Government are doing. We are all at one on tax avoidance; we all want to prevent it, but the Government are obsessed on this subject. My right hon. and hon. Friends cannot understand why we must have a complicated tax such as Corporation Tax to close some loopholes which the Government could deal with individually.
10.30 p.m.
The hon. Member for Manchester, Cheetham, when speaking about distribution, agreed that the terms of exemption should be re-examined, and we think so too. All we are saying is that the present qualification for a Section 245 Surtax company should be exactly the same. By all means, close any loopholes there may be. But there is a lot of argument bandied backwards and forwards about tax avoidance. Have the Treasury estimated how much tax avoidance there has been in the case of the Section 245 Surtax companies? My hon. Friend the Member for Belfast, North, asked this question. What is the extent of tax avoidance? We are in a vacuum when the accusation is merely made that there is tax avoidance.

Mr. Diamond: Perhaps the hon. Gentleman will consult his right hon. Friend and decide whether the line they are taking is that they do not want provisions which are less restrictive than the Surtax provisions or ones which are different.

Mr. Barber: With all respect, I intervened to make it absolutely clear that what we were aiming to do was to reestablish the position which existed under the 1952 Act. I also made it clear in the opening sentences of my speech.

Mr. Clark: The Chief Secretary is usually extremely fair. He has great


experience of these matters, and I say this in all sincerity. But here is this Clause. We are not necessarily wedded to its wording. He said that there were four snags in it. One was the point concerning the beneficial ownership of shares. We accept this. But we put down the Clause in order to give the Government notice that under Schedule 17, to which my hon. Friend the Member for Crosby (Mr. Graham Page) attempted to refer, the Government can remedy this position about close companies. Do not let us throw out this Clause simply on the technical point of its wording. The Chief Secretary knows that we have not got the machinery to get the correct wording. It is the spirit behind the Claues that really matters.
The Chief Secretary has not really answered the debate at all. His answers have been most unsatisfactory. He says, "The House will not want me to go into all the reasons", but, of course, we want him to go into all the reasons. We on this side of the House are convinced that the definition of close companies at the moment is far too wide. Of course, stop tax avoidance, but do not stop it so much that the ordinary, honest businessman is penalised.

Mr. Lubbock: I wish to add a few words before, as I hope, we divide on this Clause.
First, I want to say to the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) that I think he misunderstood my intervention. What I was attempting to show was the enormous discrepancy which exists between the provisions with regard to close companies and any other type of company. He said that a director's remuneration could not exceed £3,500 in a close company, and I pointed out that we have been reading in the last few days about remuneration of £270,000 in a company which is not a close company. Therefore, I was underlining what he had been saying.
I should like to ask the Chief Secretary one question about his speech. He said that it was important not to whittle down any of the tax avoidance provisions which we had in the old Surtax legislation. I agree with him in principle there, although I agree with the hon. Member for Worcester (Mr. Peter Walker) that

the Chief Secretary almost tends to see tax avoiders under the bed, if he ever gets there. I cannot understand why he should contend that, if we accepted the new Clause, the tax avoidance provisions are so much lighter than those which we had under the old Surtax companies legislation, to use his own short hand.
If a company did not pay a dividend in the old days under the Income Tax and Profits Tax legislation, the total amount of taxation on its profits, with the 8s. 3d. rate, was 56¼ per cent., whereas with the proposed new taxation it will be first of all 40 per cent. Corporation Tax and 30 per cent. on the remain-60 per cent. when the shareholder disposes of his shares, making a total of 58 per cent. Therefore, if we accept the Clause we shall be in almost exactly the same position, within 2 per cent., of the total taxation that we had before.
I appeal to the Chief Secretary to think about this again. If he will now say that when we reach Schedule 17 he will put back into the Bill the same provisions as we had with regard to the Surtax companies, I would be prepared to accept that and advise my right hon. and hon. Friends not to vote for the Clause. [HON. MEMBERS "Where are they?"] I would not presume to give any undertaking on behalf of the right hon. Member for Bexley (Mr. Heath) and his colleagues in this respect, but I think that most of the House would be satisfied, and that the hon. Member for Manchester, Cheetham (Mr. Harold Lever) would agree, if the Chief Secretary would now give us the undertaking that he will put into Schedule 17 exactly the same provisions with regard to tax avoidance as we had under the old legislation.

Mr. Heath: The new Clause is probably the most important single thing that we have debated on the Report stage of the Bill. It was of such importance that when we discussed a similar new Clause, and one which was not as well drafted, in Committee at ten minutes past one in the morning the Chief Secretary suggested that it was so important that we should withdraw it and debate it at a time more suitable to hon. and right hon. Members. We did that, and we have now had a long and most interesting debate to which the Chief Secretary has


given us the most lamentable reply given on the whole Bill so far.
We have heard the right hon. Gentleman in many moods. We have heard him obdurate and sometimes flexible, we have heard him arrogant and sometimes persuasive, but never have I heard him in the whole of the proceedings on the Bill in Committee and in the House give such a display of superficiality and naïvety as we have just heard from him. This is deplorable on a matter which concerns a large number of companies, many of them the great companies of this country. We have said before in these debates that not only Treasury Ministers but the Government themselves have become obsessed with tax avoidance to the detriment of every other single economic interest. This is well known to be the interest of the Revenue. It is not interested in the wealth-creating potential of this country. People at the Revenue are interested in all the petty detail of tax avoidance. That can be said to be their job, but it is not the job of Treasury Ministers. The job of Treasury Ministers and of the Government as a whole is to look at all the consequences of the action which they are taking. The consequences of their action in the definition of close companies which they are maintaining tonight are very considerable. Everyone agrees about that.
The hon. Member for Manchester, Cheetham (Mr. Harold Lever) has said that the answer is to change the arrangements for close companies. Very well. Some of this can be discussed on Schedule 17, and the Government can do more if they are prepared to do it. But it is not right for the Chief Secretary to drop hints about better things in the Schedule, the selection of which Mr. Speaker has not yet moved to make, without saying whether or not the Government are prepared

seriously to look at these matters on Schedule 17.

The Government ought to do so because of the importance of these questions for the economy. The right hon. Gentleman asked, "Why are people suspicious of the term 'close company'?" I will tell him frankly why—because, under this definition as now drawn, controls and regulations are set up which make many great companies and a large number of ordinary companies and their hard-working boards object to being treated as potential criminals because there will be a small number who will try to avoid taxes.

This attitude is typical of the British citizen as a whole. Those of us who have been in government for some years have ourselves made mistakes in this respect—I admit it freely—because the British citizen does not like to see legislation affecting, controlling and detailing his actions which ought to apply only to a very small number of people.

That is the explanation why industry and finance today believe that this Government are against them. It is this—this is what really concerns me in the national interest—which is damaging the British economy at one of the most critical periods of its history since the Second World War. That is why I say to the Chief Secretary that I deeply regret what I regard as his lamentable performance tonight. We shall divide the House, and I sincerely hope that the right hon. Gentleman and his colleagues will think about the matter again and take effective action on Schedule 17.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 272, Noes 277.

Division No. 237.]
AYES
[10.42 p.m.


Agnew, Commander Sir Peter
Bennett, Sir Frederic (Torquay)
Brown, Sir Edward (Bath)


Alison, Michael (Barkston Ash)
Berkeley, Humphry
Bruce-Gardyne, J.


Allan, Robert (Paddington, S.)
Berry, Hn. Anthony
Bryan, Paul


Allason, James (Hemel Hempstead)
Biggs-Davison, John
Buchanan-Smith, Alick


Amery, Rt. Hon. Julian
Birch, Rt. Hn. Nigel
Bullus, Sir Eric


Anstruther-Gray, Rt. Hn. Sir W.
Black, Sir Cyril
Burden, F. A.


Astor, John
Blaker, Peter
Butcher, Sir Herbert


Atkins, Humphrey
Bossom, Hn. Clive
Buxton, Ronald


Awdry, Daniel
Box, Donald
Campbell, Gordon


Baker, W. H. K.
Boyd-Carpenter, Rt. Hn. J.
Carlisle, Mark


Balniel, Lord
Braine, Bernard
Carr, Rt. Hn. Robert


Barber, Rt. Hn. Anthony
Brewis, John
Cary, Sir Robert


Barlow, Sir John
Brinton, Sir Tatton
Channon, H. P. C.


Batsford, Brian
Bromley-Davenport, Lt.-Col. Sir Walter
Chataway, Christopher


Bell, Ronald
Brooke, Rt. Hn. Henry
Chichester-Clark, R.




Clark, Henry (Antrim, N.)
Hirst, Geoffrey
Page, R. Graham (Crosby)


Clark, William (Nottingham, S.)
Hobson, Rt. Hn. Sir John
Pearson, Sir Frank (Clitheroe)


Clarke, Brig. Terence (Portsmth, W.)
Hooson, H. E.
Peel, John


Cole, Norman
Hopkins, Alan
Percival, Ian


Cooke, Robert
Hordern, Peter
Peyton, John


Cooper, A. E.
Hornby, Richard
Pickthorn, Rt. Hn. Sir Kenneth


Cooper-Key, Sir Neill
Hornsby-Smith, Rt. Hn. Dame P.
Pike, Miss Mervyn


Corfield, F. V.
Hutchison, Michael Clark
Pitt, Dame Edith


Costain, A. P.
Iremonger, T. L.
Pounder, Rafton


Courtney, Cdr. Anthony
Irvine, Bryant Godman (Rye)
Powell, Rt. Hn. J. Enoch


Craddock, Sir Beresford (Spelthorne)
Jenkin, Patrick (Woodford)
Price, David (Eastleigh)


Crawley, Aidan
Jennings, J. C.
Prior, J. M. L.


Crosthwaite-Eyre, Col. Sir Oliver
Johnson Smith, G. (East Grinstead)
Pym, Francis


Crowder, F. P.
Johnston, Russell (Inverness)
Quennell, Miss J. M.


Cunningham, Sir Knox
Jones, Arthur (Northants, S.)
Ramsden, Rt. Hn. James


Curran, Charles
Jopling, Michael
Redmayne, Rt. Hn. Sir Martin


Currie, G. B. H.
Joseph, Rt. Hn. Sir Keith
Rees-Davies, W. R.


Dalkeith, Earl of
Kaberry, Sir Donald
Renton, Rt. Hn. Sir David


Dance, James
Kerby, Capt. Henry
Ridley, Hn. Nicholas


Davies, Dr. Wyndham (Perry Barr)
Kerr, Sir Hamilton (Cambridge)
Ridsdale, Julian


d'Avigdor-Goldsmid, Sir Henry
Kershaw, Anthony
Roberts, Sir Peter (Heeley)


Dean, Paul
Kilfedder, James A.
Rodgers, Sir John (Sevenoaks)


Digby, Simon Wingfield
Kimball, Marcus
Roots, William


Dodds-Parker, Douglas
King, Evelyn (Dorset, S.)
St. John-Stevas, Norman


Doughty, Charles
Kirk, Peter
Sandys, Rt. Hn. D.


Douglas-Home, Rt. Hn. Sir Alec
Kitson, Timothy
Scott-Hopkins, James


Drayson, G. B.
Lagden, Godfrey
Sharples, Richard


du Cann, Rt. Hn. Edward
Lambton, Viscount
Shepherd, William


Eden, Sir John
Lancaster, Col. C. G.
Sinclair, Sir George


Elliot, Capt. Walter (Carshalton)
Langford-Holt, Sir John
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Legge-Bourke, Sir Harry
Smyth, Rt. Hn. Brig. Sir John


Emery, Peter
Lewis, Kenneth (Rutland)
Soames, Rt. Hn. Christopher


Eyre, Reginald
Litchfield, Capt. John
Spearman, Sir Alexander


Farr, John
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Speir, Sir Rupert


Fell, Anthony
Lloyd, Ian (P'tsm'th, Langstone)
Stainton, Keith


Fisher, Nigel
Lloyd, Rt. Hn. Selwyn (Wirral)
Stanley, Hn. Richard


Fletcher-Cooke, Charles (Darwen)
Longden, Gilbert
Studholme, Sir Henry


Fletcher-Cooke, Sir John (S'pton)
Loveys, Walter H.
Talbot, John E.


Foster, Sir John
Lucas, Sir Jocelyn
Taylor, Sir Charles (Eastbourne)


Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
McAdden, Sir Stephen
Taylor, Edward M. (G'gow, Cathcart)


Galbraith, Hn. T. G. D.
MacArthur, Ian
Teeling, Sir William


Gammans, Lady
Mackenzie, Alasdair (Ross &amp; Crom'ty)
Temple, John M.


Gibson-Watt, David
Mackie, George Y. (C'ness &amp; S'land)
Thatcher, Mrs. Margaret


Giles, Rear-Admiral Morgan
Maclean, Sir Fitzroy
Thomas, Sir Leslie (Canterbury)


Gilmour, Ian (Norfolk, Central)
Macleod, Rt. Hn. Iain
Thompson, Sir Richard (Croydon, S.)


Gilmour, Sir John (East Fife)
McMaster, Stanley
Tiley, Arthur (Bradford, W.)


Glover, Sir Douglas
McNair-Wilson, Patrick
Tilney, John (Wavertree)


Glyn, Sir Richard
Maginnis, John E.
Turton, Rt. Hn. R. H.


Godber, Rt. Hn. J. B.
Marples, Rt. Hn. Ernest
Tweedsmuir, Lady


Goodhart, Philip
Marten, Neil
van Straubenzee, W. R.


Goodhew, Victor
Mathew, Robert
Vaughan-Morgan, Rt. Hn. Sir John


Gower, Raymond
Maude, Angus
Vickers, Dame Joan


Grant, Anthony
Maudling, Rt. Hn. Reginald
Walder, David (High Peak)


Grant-Ferris, R.
Mawby, Ray
Walker, Peter (Worcester)


Gresham Cooke, R.
Maxwell-Hyslop, R. J.
Walker-Smith, Rt. Hn. Sir Derek


Griffiths, Eldon (Bury St. Edmunds)
Maydon, Lt.-Cmdr. S. L. C.
Wall, Patrick


Griffiths, Peter (Smethwick)
Meyer, Sir Anthony
Walters, Dennis


Grimond, Rt. Hn. J.
Mills, Peter (Torrington)
Ward, Dame Irene


Gurden, Harold
Mills, Stratton (Belfast, N.)
Weatherill, Bernard


Hall, John (Wycombe)
Miscampbell, Norman
Webster, David


Hall-Davis, A. G. F.
Mitchell, David
Wells, John (Maidstone)


Hamilton, Marquess of (Fermanagh)
Monro, Hector
Whitelaw, William


Hamilton, M. (Salisbury)
More, Jasper
Williams, Sir Rolf Dudley (Exeter)


Harris, Frederic (Croydon, N. W.)
Morrison, Charles (Devizes)
Wills, Sir Gerald (Bridgwater)


Harris, Reader (Heston)
Mott-Radclyffe, Sir Charles
Wilson, Geoffrey (Truro)


Harrison, Brian (Maldon)
Munro-Lucas-Tooth, Sir Hugh
Wise, A. R.


Harvey, Sir Arthur Vere (Macclesf'd)
Murton, Oscar
Wolrige-Gordon, Patrick


Harvey, John (Walthamstow, E.)
Neave, Airey
Wood, Rt. Hn Richard


Harvie Anderson, Miss
Nicholson, Sir Godfrey
Woodhouse, Hn. Christopher


Hastings, Stephen
Noble, Rt. Hn. Michael
Woodnutt, Mark


Hawkins, Paul
Nugent, Rt. Hn. Sir Richard
Wylie, N. R.


Hay, John
Onslow, Cranley
Yates, William (The Wrekin)


Heald, Rt. Hn. Sir Lionel
Orr, Capt. L. P. S.
Younger, Hn. George


Heath, Rt. Hn. Edward
Orr-Ewing, Sir Ian



Hendry, Forbes
Osborn, John (Hallam)
TELLERS FOR THE AYES:


Higgins, Terence L.
Osborne, Sir Cyril (Louth)
Mr. McLaren and Mr. Ian Fraser.


Hill, J. E. B. (S. Norfolk)
Page, John (Harrow, W.)





NOES


Abse, Leo
Atkinson, Norman
Baxter, William


Albu, Austen
Bacon, Miss Alice
Bence, Cyril


Allaun, Frank (Salford, E.)
Bagier, Gordon A. T.
Bennett, J. (Glasgow, Bridgeton)


Alldritt, Walter
Barnett, Joel
Binns, John







Bishop, E. S.
Henderson, Rt. Hn. Arthur
Oram, Albert E. (E. Ham, S.)


Blackburn, F.
Herbison, Rt. Hn. Margaret
Orbach, Maurice


Blenkinsop, Arthur
Hobden, Dennis (Brighton, K'town)
Orme, Stanley


Boardman, H.
Holman, Percy
Oswald, Thomas


Boston, T. G.
Horner, John
Owen, Will


Bottomley, Rt. Hn. Arthur
Houghton, Rt. Hn. Douglas
Padley, Walter


Bowden, Rt. Hn. H. W. (Leics S. W.)
Howarth, Harry (Wellingborough)
Page, Derek (King's Lynn)


Braddock, Mrs. E. M.
Howarth, Robert L. (Bolton, E.)
Paget, R. T.


Bradley, Tom
Howell, Denis (Small Heath)
Palmer, Arthur


Bray, Dr. Jeremy
Howie, W.
Pannell, Rt. Hn. Charles


Brown, Rt. Hn. George (Belper)
Hoy, James
Pargiter, G. A.


Brown, Hugh D. (Glasgow, Provan)
Hughes, Cledwyn (Anglesey)
Park, Trevor (Derbyshire, S. E.)


Buchan, Norman (Renfrewshire, W.)
Hughes, Emrys (S. Ayrshire)
Parker, John


Buchanan, Richard
Hughes, Hector (Aberdeen, N.)
Parkin, B. T.


Butler, Herbert (Hackney, C.)
Hunter, Adam (Dunfermline)
Pavitt, Laurence


Butler, Mrs, Joyce (Wood Green)
Hunter, A. E. (Feltham)
Pearson, Arthur (Pontypridd)


Callaghan, Rt. Hn. James
Hynd, H. (Accrington)
Pentland, Norman


Carmichael, Neil
Irving, Sydney (Dartford)
Perry, Ernest G.


Castle, Rt. Hn. Barbara
Jackson, Colin
Popplewell, Ernest


Chapman, Donald
Janner, Sir Barnett
Prentice, R. E.


Coleman, Donald
Jay, Rt. Hn. Douglas
Price, J. T. (Westhoughton)


Conlan, Bernard
Jeger, George (Goole)
Probert, Arthur


Corbet, Mrs. Freda
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Pursey, Cmdr. Harry


Cousins, Rt. Hn. Frank
Jenkins, Hugh (Putney)
Randall, Harry


Craddock, George (Bradford, S.)
Jenkins, Rt. Hn. Roy (Stechford)
Rankin, John


Crawshaw, Richard
Johnson, Carol (Lewisham, S.)
Redhead, Edward


Cronin, John
Johnson, James (K'ston-on-Hull, W.)
Rees, Merlyn


Crosland, Rt. Hn. Anthony
Jones, Dan (Burnley)
Rhodes, Geoffrey


Crossman, Rt. Hn. R. H. S.
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Richard, Ivor


Cullen, Mrs. Alice
Jones, J. Idwal (Wrexham)
Roberts, Albert (Normanton)


Dalyell, Tam
Jones, T. W. (Merioneth)
Roberts, Goronwy (Caernarvon)


Darling, George
Kelley, Richard
Robertson, John (Paisley)


Davies, Ifor (Gower)
Kenyon, Clifford
Robinson, Rt. Hn. K. (St. Pancras, N.)


Davies, S. O. (Merthyr)
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Rodgers, William (Stockton)


de Freitas, Sir Geoffrey
Kerr, Dr. David (W'worth, Central)
Rogers, George (Kensington, N.)


Delargy, Hugh
Lawson, George
Rose, Paul B.


Dell, Edmund
Leadbitter, Ted
Ross, Rt. Hn. William


Dempsey, James
Ledger, Ron
Rowland, Christopher


Diamond, Rt. Hn. John
Lee, Miss Jennie (Cannock)
Sheldon, Robert


Dodds, Norman
Lever, Harold (Cheetham)
Shinwell, Rt. Hn. E.


Doig, Peter
Lever, L. M. (Ardwick)
Shore, Peter (Stepney)


Driberg, Tom
Lewis, Arthur (West Ham, N.)
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)


Duffy, Dr. A. E. P.
Lewis, Ron (Carlisle)
Short, Mrs. Renée (W'hampton, N. E.)


Dunn, James A.
Lipton, Marcus
Silkin, John (Deptford)


Dunnett, Jack
Loughlin, Charles
Silkin, S. C. (Camberwell, Dulwich)


Edelman, Maurice
Mabon, Dr. J. Dickson
Silverman, Julius (Aston)


Edwards, Robert (Bilston)
McBride, Neil
Silverman, Sydney (Nelson)


English, Michael
McCann, J.
Skeffington, Arthur


Ennals, David
MacColl, James
Slater, Mrs. Harriet (Stoke, N.)


Ensor, David
MacDermot, Niall
Slater, Joseph (Sedgefield)


Evans, Albert (Islington, S. W.)
McGuire, Michael
Small, William


Evans, Ioan (Birmingham, Yardley)
McInnes, James
Snow, Julian


Fernyhough, E.
McKay, Mrs. Margaret
Soskice, Rt. Hn. Sir Frank


Finch, Harold (Bedwellty)
Mackenzie, Gregor (Rutherglen)
Steele, Thomas (Dunbartonshire, W.)


Fletcher, Sir Eric (Islington, E.)
McLeavy, Frank
Stewart, Rt. Hn. Michael


Fletcher, Ted (Darlington)
Mahon, Peter (Preston, S.)
Stonehouse, John


Fletcher, Raymond (Ilkeston)
Mahon, Simon (Bootle)
Stones, William


Floud, Bernard
Mallalieu, J. P. W. (Huddersfield, E.)
Strauss, Rt. Hn. G. R. (Vauxhall)


Foley, Maurice




Foot, Sir Dingle (Ipswich)
Manuel, Archie
Summerskill, Hn. Dr. Shirley


Foot, Michael (Ebbw Vale)
Mapp, Charles
Swain, Thomas


Ford, Ben
Marsh, Richard
Swingler, Stephen


Fraser, Rt. Hn. Tom (Hamilton)
Mason, Roy
Symonds, J. B.


Freeson, Reginald
Maxwell, Robert
Taverne, Dick


Galpern, Sir Myer
Mayhew, Christopher
Taylor, Bernard (Mansfield)


Garrett, W. E.
Mellish, Robert
Thomas, George (Cardiff, W.)


George, Lady Megan Lloyd
Mendelson, J. J.
Thomas, Iorwerth (Rhondda, W.)


Ginsburg, David
Mikardo, Ian
Thomson, George (Dundee, E.)


Greenwood, Rt. Hn. Anthony
Millan, Bruce
Thornton, Ernest


Gregory, Arnold
Miller, Dr. M. S.
Tinn, James


Grey, Charles
Milne, Edward (Blyth)
Tomney, Frank


Griffiths, David (Rother Valley)
Molloy, William
Tuck, Raphael


Griffiths, Rt. Hn. James (Llanelly)
Monslow, Walter
Urwin, T. W.


Griffiths, Will (M'chester, Exchange)
Morris, Charles (Openshaw)
Varley, Eric G.


Gunter, Rt. Hn. R. J.
Morris, John (Aberavon)
Walden, Brian (All Saints)


Hale, Leslie
Mulley, Rt. Hn. Frederick (Sheffield Pk)
Walker, Harold (Doncaster)


Hamilton, James (Bothwell)
Murray, Albert
Wallace, George


Hamilton, William (West Fife)
Neal, Harold
Watkins, Tudor


Hamling, William (Woolwich, W.)
Newens, Stan
Weitzman, David


Hannan, William
Noel-Baker, Francis (Swindon)
Wells, William (Walsall, N.)


Harper, Joseph
Noel-Baker, Rt. Hn. Philip (Derby, S.)
White, Mrs. Eirene


Harrison, Walter (Wakefield)
Norwood, Christopher
Whitlock, William


Hart, Mrs. Judith
Oakes, Gordon
Wigg, Rt. Hn. George


Hazell, Bert
Ogden, Eric
Wilkins, W. A.


Heffer, Eric S.
O'Malley, Brian
Willey, Rt. Hn. Frederick







Williams, Alan (Swansea, W.)
Wilson, William (Coventry, S.)
Yates, Victor (Ladywood)


Williams, Clifford (Abertillery)
Winterbottom, R. E.
Zilliacus, K.


Williams, Mrs. Shirley (Hitchin)
Woodburn, Rt. Hn. A.



Williams, W. T. (Warrington)
Woof, Robert
TELLERS FOR THE NOES:


Willis, George (Edinburgh, E.)
Wyatt, Woodrow
Mr. Fitch and Mr. Gourlay.

New Clause.—(PERSONAL RELIEFS FOR WIDOWED MOTHERS.)

In section 210 of the Income Tax Act 1952 at the end of subsection 1(a) the following words shall be inserted:—
(6) if she is a widow and has residing with her a child of her family under the age of 19 years, to a deduction from the amount of income tax with which she is chargeable equal to tax at the standard rate on £280".—[Mrs. Thatcher.]

Brought up, and read the First time.

Mrs. Margaret Thatcher: I beg to move, That the Clause be read a Second time.

Mr. Speaker: With this new Clause we have agreed to discuss new Clause No. 29 "Allowance for domestic help for employed disabled person".

Mrs. Thatcher: This Clause may not be of shattering importance to the British economy as a whole, but it certainly is important to the lives of a number of our citizens. Its purpose is to help widows with children by reducing the amount of tax that they would otherwise have to pay. The House will be aware that in other branches of legislation the widowed mother's claims have been specially recognised by special provisions, but so far the tax system has never recognised the widowed mother as a person requiring special reliefs.
The merit of the case speaks for itself. Most women placed in the position of being widowed with young children would have one thing uppermost in their minds—that whatever happened the children must suffer as little as possible. Frequently a comparison which is made is that between the income of the family before the death of the father, with only the father earning, and the income of the family when only the mother is earning. Nowadays there is another comparison to be made. So often many families have both the father and the mother earning, and the children benefit from the incomes of both. After the death of the father they are reduced to the income of the mother only.
The real comparison, from the children's viewpoint, is the life they led under the old régime, when both father and mother were earning, and the life under the new one, after the death of the

father, when only the mother is earning. When father was alive there were two lots of personal relief, two lots of earned income relief, except where the joint income exceeded £10,000 per annum, which I am not unduly concerned with at the moment, and two lots of reduced rate relief. After the death of the father, the widowed mother will have only the single personal rate of tax relief, one earned income relief and one lot of reduced rate relief. The family will, therefore, have to live with a considerably reduced income. The gap is very considerable and no recognition is at present given to this fact under the tax arrangements.
Thus, at a time when the widow has the greatest grief to bear, she also has the greatest readjustment to make in her financial position, and our contention is that we are still not doing enough to help her. I know that a great deal has been done in the past in other spheres of legislation. It seems rather ironic that other legislation should recognise this claim, but tax legislation so far does not.
Under Section 214 of the Income Tax Act, if a widow has to employ a housekeeper, or is able to do so, she can get a tax relief of £75. If she cannot afford a housekeeper, but nevertheless employs someone to look after the children, she can get tax relief under Section 17 of the Finance Act, 1960, if she has a nonresident child-minder. Neither of these reliefs is characteristic to the widow nor to the widowed mother. Both are available as well to the widower. Although his position may be very tragic in the grief-stricken sense, his income is very much greater, and has been continuing throughout the period of the tragedy, whereas that of the widow may not have been.
There is one other tax position I should like to refer to and that is the position immediately before the introduction of this Finance Bill, compared with the position since its introduction, on the assumption that its provisions will take effect. Before the Bill, the widowed mother who had to employ someone in order to enable her to go out to work to earn the family's living could get relief on the National Insurance contribution which she paid in respect of the person she employed. The Financial Secretary will perhaps know that


if any woman who is a widow employs a domestic help for more than eight hours a week, a National Insurance contribution of some 11s. 4d. a week is payable in respect of that person.
11.0 p.m.
Before the present Finance Bill, that 11s. 4d. every week would rank for tax relief and could be set against the widow's income so that she got full relief for it. Since the Finance Bill, on the assumption that it goes through, which I think is probably a realistic assumption, relief has been withdrawn completely in respect of that 11s. 4d. every week. So, in common with other women who employ people to enable them to go out to work, this Finance Bill has in fact worsened the position of the widowed mother who has to employ help to enable her to go out to work. Therefore, our contention is that the Financial Secretary has by this Bill made the position worse and he therefore has some relief in the kitty to give back in another way.
On another occasion we asked him still to allow relief under circumstances like these to all employers who employed people in this way, and he told me that the cost of doing so would be to give back £2 million of what he had taken away by the Bill. So we can take it that he has got £2 million in hand, and instead of giving it back to people such as myself, we thought it better that he should give it back to the widowed mother who is more in need.
The new Clause provides higher tax reliefs for the widowed mother so long as she has living with her a child under the age of 19. The relief we have decided to ask for is roughly half way between the relief provided for a single person and that provided for a married couple. The relief for the single person is £220 a year, that for the married couple is £340 a year, and for the widowed mother we are proposing £280 a year. This would, in fact, be a kind of modest housekeeping allowance, part of which would be her own personal relief, and the extra £60 because she is a widowed mother carrying on a difficult task.
I have not the slightest shadow of doubt that the Financial Secretary will have prepared very well-considered defences

why he cannot accept the Clause. I think that he is the biggest "No-man" of the present Government, judging by his performance throughout the Finance Bill. When the Government want to put up a man to say "No" they always put up the handsomest man to do so—the handsomest man, at any rate, from the Treasury. Of course, those of us with more experience will know that most of us prefer the plain man with cash in his pocket to the handsome man without, and I expect that that will be the case today.
May I go through the hon. Gentleman's possible defences? Firstly, he will say that this will cost the Treasury so much. I think that is entirely the wrong approach. He has already got £2 million as a result of this Finance Bill which we ought to have back. But what we are really deciding in this Clause, the viewpoint we are really putting, is that there are certain groups of people who have an equitable claim to have less tax extracted from them and to bear a lesser burden compared with other people.
I have not the exact figures of the cost of this Clause, but I have considered the Government Actuary's report which the Financial Secretary presented to the House on the third quinquennial review of the National Insurance Acts. At present there are approximately 141,000 widowed mothers' allowances in payment, and 21,000 widows' allowances, some, not all, of which would go to widowed mothers. The report also tells us in rather technical language that in future men are going to have more stamina and live longer. In paragraph 40, it says that there should be a decline in the number of widows, and it goes on to say that this is a reflection of the assumed improvement in male mortality. I have no doubt that that is good news, but it means that, if the Financial Secretary accedes to the new Clause, the cost of it will go down during the coming years.
His second defence will be that help has been provided in other ways. If he admits that widowed mothers deserve special help and that help has been provided in other ways, he also admits that widowed mothers specially deserve help aid therefore he will assist my case and not his own defence.
His third argument will be that such a new Clause would help only those who already pay tax. Finance Bills do not give anything away. We are really at the annual schedule of legalised larceny, and one's advice to a professional burglar would be that if he is going to steal, he should not take from those least able to withstand the loss. His fourth argument undoubtedly will be, "Why has this not been done before?" As a barrister, the Financial Secretary knows full well that if he is defending himself on a charge of larceny, it is no defence to say that he erred in good company.
During the Finance Bill, we from this side have moved several Amendments and new Clauses designed to help single women and widows. Each one has met with the same reply: a good deal of sympathy, but no action this year. It has shown that it is very much easier to touch a man's heart than it is to touch his pocket.
We are giving the Financial Secretary this last chance. We hope that he might consider part of the new Clause. If we ask for too little, we will ask for more. If we ask for too much, we might be prepared to take less. If it is suggested that the drafting is defective, he will still have time to introduce his own Amendment to Clause 10, on the assumption that we will discuss that later.

Mr. Will Griffiths: I have not taken part in the debates on the Bill up to this stage, and I do so now only because of the provocations contained in the speech of the hon. Lady the Member for Finchley (Mrs. Thatcher). She is always beguiling, and she has made a characteristic and attractive speech tonight. We all listened to the sympathy that she expressed for widows and widowed mothers, but I cannot help recalling that fairly recently she had executive responsibility in this field. I twice introduced a Private Member's Bill to abolish the earnings rule for widowed mothers, and I did not see the hon. Lady giving me any encouragement at all. So her attractive and persuasive speech tonight has to be compared with her performance when she was in office, and the support she then received from the tut-tutting hon. Members on the benches behind her.
It does no service to our Parliamentary institutions to have a charade of this kind, with hon. Members who held office so recently, apparently completely unaware of the hardships that widowed mothers and widows suffered and still suffer, as the hon. Lady illustrated so vividly tonight, suddenly becoming blindingly aware of the appalling position their fellow countrywomen are in. When she was a member of the Government she did nothing at all about them. It is true that the hon. Lady was a junior Minister and that possibly she did not have great influence in the higher reaches of the Cabinet. If, however, she really meant what she said tonight, she should have resigned her office. My criticism of an attractive speech is that it does a disservice to our Parliamentary institutions because it is full of hypocrisy and humbug.

Mr. Alison: In supporting my hon. Friend the Member for Finchley (Mrs. Thatcher) and giving general support to her new Clause, I wonder whether I might refer specifically to new Clause 29 "Allowance for domestic help for employed disabled person", which appears in the names of myself and a number of my hon. Friends and the aim of which is to provide special tax allowances for disabled persons who are engaged in whole-time work and for whom domestic help is unavoidable and essential. I hope that I shall carry with me the sympathy and indulgence of the hon. Member for Manchester, Exchange (Mr. Will Griffiths) because, not having been a Member of the House in the last Parliament, I am at least free of the possible charge of hypocrisy in voting. I hope, therefore, that the hon. Member will listen to me with an open mind and judge the merits of my case without prejudice.
It will assist if in putting the case I try to argue from the particular to the general. My interest stems from a constituency case. It is a good thing to refer to particular cases, because this helps the House to focus on a flesh-and-blood situation and enables it to judge the merits of abstract legislative theory against the background of a human being.
The only difference between the constituent and ourselves is that we make the laws and he is at the receiving end of


them. He is a man aged 49 and he has been a polio victim since the age of 15. Since that age he has been totally paralysed below the waist and has had the limited use of one arm. Thus, he has had total disability of three of his four limbs. For 33 years, during which time he has been drawing National Assistance and whatever form of assistance preceded it, he has been disabled, unemployed and chairborne.
By a freak stroke of good luck, this constituent of mine found himself, in the village in which he lived in my constituency, living as a neighbour of somebody who recently became director of the National Scientific Lending Libary, at Boston Spa. For some time before his appointment as director of that establishment, the neighbour was in the habit of calling on my constituent, taking an interest in him and befriending him. When he became director, he went out of his way to see whether special work could be found for this permanently paralysed cripple to get him out of his home and to enable him to make a contribution to society and to lead something like a normal life.
By dint of a good deal of hard work by all concerned, they managed to take him on as a temporary clerical assistant in the Library, sorting out the waiting list of books, which are sent all over the world on loan from the Library. So satisfactory was this individual—a polio victim since the age of 15 and unemployed for 33 years—in this temporary work that he has now been taken on as a permanent employed official of the Library at £12 a week. He has been doing the work for more than a year.
Immediately this freak opportunity occurred, however—it resulted partly from chance and partly from human kindness—there was a counteraction from the iron arm of the law, which we draft and set out in the Statute Book. As soon as this man succeeded in getting work and a regular wage, after all those years of disability and unemployment, the first thing to happen was that the West Riding County Council, which had been providing him with 12 hours' home help per week because he was living by himself, his mother having died shortly before, said that it would be necessary to charge

him £3 8s. a week for the home help because he was now in work.
11.15 p.m.
He could not possibly afford this out of £12 a week, and so he had to dispose of the home help provided by the West Riding authorities and engage help of a more limited nature, costing him £2 10s. a week. Also, he now has to pay the cost of getting to work at a rate higher than that of the ordinary person because he cannot use public transport. He has to pay a higher council house rent because his rebate has been reduced.
He must employ domestic help, because he cannot even wash up or make his own bed. He simply cannot carry on without very adequate domestic help, and while his case must be equalled, unhappily, many times throughout this country, all he seeks is some relief on the cost of that domestic help. It is a remarkable and perhaps sobering fact that this man reckons he is just about 10s. a week better off by working full-time than when he was living on the State.
All he asks is this relief in respect of his domestic help. In presenting his case, I appreciate straight away that there are difficulties in making allowances for these special cases—exceptions always lead to complications. But I want at once to dispose of two standard arguments which are always advanced by Treasury Ministers. The first is that it is impracticable, and here I would quote a letter from the Financial Secretary in which he states that mine is a very reasonable argument but adds that it would be impracticable to grant what we ask because, as the Royal Commission on the Taxation of Profits and Income pointed out, to take account of the precise items of personal expenditure which individual taxpayers incurred, would be quite impracticable.
That is the argument. It would be impracticable to take account of the precise items of personal expenditure in respect of each individual. This is the general plea of impracticability, but I would draw the attention of the Government, as I have already drawn that of the Financial Secretary, to the fact that there is already a special concession in respect of a tax allowance for domestic


help. It is a statutory concession. Section 479 of the Income Tax Act, 1952, has provided a case history of a special concession in respect of domestic help for clergymen in vicarages, because it is held to be necessary in consequence of the work of ministers of religion. It probably has something to do with parishioners attending parish meetings in vicarages. But this is a special concession in respect of a particular category, and to say that what I seek this evening is impracticable is hardly a tenable argument when such a concession has already been conceded in respect of the clergy.
Disability is often prayed in aid as a particularly difficult form of classification from a tax point of view, and here the Financial Secretary has again reminded me of what the Royal Commission had to say. It is that it is not possible to devise a scheme which is both fair as between one taxpayer and another and which is at the same time practicable. But the Conservative Government of 1962 introduced in the Finance Act of that year the special help for blind persons because they could be regarded as being in a unique class. In other words, they could be easily identified.
So, the plea of impracticability has already been given away, because the Government have made a special concession to clergy and, in the case of disability the objection is ruled out because we make a special concession for the blind. If we look at these two special categories—the clergy in relation to domestic help, and the blind who have special allowances—we find that in their cases it is not only that they merit special treatment on their own grounds. I emphasise that, because nobody for a moment suggests that a blind person should not have special treatment, but the fact is that, in law and for the purposes of taxation, we treat them differently because they are easily identifiable. Their merit is that they are easily classified. It is a matter of facility of classification, not the merits of disabilities or pains or grief which they suffer.
The clergy are all too easy to identify because they have a particular profession and wear dark suits and dog collars. Blind people are also in a special category because we know what a blind person is, and his disabilities come in for

the same ease of classification. But it is not the nature of the disabilities or the special expense which they involve which is the clue to the Treasury concession in these cases: it is ease of classification. Nobody will convince me that it is more essential for a parson to have an expense allowance in respect of domestic help that it is for the crippled person to whom I have referred. Nobody will convince me that a blind person is necessarily worse off than the person crippled in both legs, who is permanently chairborne and can use only one arm.
We are supposed to make laws. It is surely not beyond the wit of man to devise a category which could include a person who has lost three limbs, so that such a person could be given a tax allowance for the domestic help without which he could not carry out his job. If my constituent did decide to leave his job, he would have to go on National Assistance, obtain home help and cost the Treasury £15 a week. The Treasury would not be much better off. Could the Financial Secretary show a little human consideration and make some allowance for these people?

Mr. MacDermot: This is the third occasion on which we have discussed the subject of personal reliefs. On each of the two previous occasions I have had to point out that in a year in which my right hon. Friend the Chancellor of the Exchequer has had to increase taxation he cannot seek to sort out the anomalies which exist in personal reliefs and to make further concessions.
Of the two subjects which have been raised, one is new and one we have discussed before. The hon. Lady the Member for Finchley (Mrs. Thatcher) moved a new Clause proposing personal relief for widowed mothers. She sought to flatter me as to my appearance. I hope that she remembers that handsome is as handsome does. It appears to me that when the Opposition have a case which may evoke sympathy but which has little logic behind it, they put up their most attractive representative to try to beat the brow of Treasury Ministers.
I think that the hon. Lady realised the defects of the case which she argued because she deployed very persuasively the arguments against her own proposals. She is proposing that a widow who has


residing with her a child under 19 should receive a personal allowance of £280 instead of the ordinary single personal allowance of £220. The allowance proposed in the new Clause would be available even if the widow was not entitled to a child allowance in respect of the child. It would be available to widows, and widows alone, and not to widowers or other single people who would be in the position of being responsible for the upkeep and maintenance of a child. Therefore, even if we were in a position to accept proposals of this kind, one in this form would not be acceptable.
The hon. Lady pointed out that in our tax system the widowed mother has never been the subject of special relief. There is good reason for that which no doubt was recognised by Treasury Ministers under the previous Administration. In dealing with tax reliefs, one cannot single out a category of people for benefit alone when other people in similar circumstances are not entitled to that benefit. If a relief of this kind were to be given, it would have to be given to all people who were in a similar position to widows. Although widows always attract great sympathy for their plight, when one is looking at this matter from a Revenue point of view, one must compare her position with that of another taxpayer who has the same responsibilities and the same means available to discharge them.
The hon. Lady pointed out some of the special reliefs that are available to widows already—the child minder's allowance and the £40 additional personal allowance where she does not have a resident child minder. There are also, in the case where the child qualifies for child allowances, child allowances varying from £115 if the child is not over 11 years of age, £140 if between 11 and 16, and £165 if the child is over 16 and is undergoing full-time education or training.
She made the comparison of the position of the widow with that of a married couple where there are available two sets of allowances; but the reason, of course, for this is that the latter are the allowances for two persons—one taxpayer with a joint assessment for two persons. These are some of the detailed reasons why, quite apart from the general difficulty

which I mentioned at the outset, we are not in a position to grant relief of the kind in this Budget and why this Clause must be rejected.
The hon. Member for Barkston Ash (Mr. Alison) raised again the question of domestic help for employed disabled persons, one which has arisen as a result of his concern for a constituent of whom he told us about in Committee and again this evening and whose circumstances obviously are such as to evoke great sympathy. What he is proposing is that a disabled taxpayer who works full time should be entitled to tax allowance in the case of a domestic servant to the extent that he necessarily is involved, by the performance of his duties, in expenditure on domestic help that he would not otherwise incur.
The arguments that he adduced in support of his new Clause are ones which I sought to answer in Committee. There was one which I was unable to answer and which in deference to the thoroughness with which the hon. Member deployed his argument, I should like to deal with now. That was the parallel he instanced, or he described it as a parallel, of the rather unusual case under which a clergyman in certain circumstances may claim a tax allowance for the part cost of domestic help. I told the Committee I was unaware of the circumstances of this allowance.
I have looked into it and it is an unusual one, but it derives from the general taxation principle that an individual, whether disabled or not, who can show that he has to incur wholly, exclusively and necessarily in the performance of the duties of his office or employment certain expenses, can claim deduction for the appropriate part of that expenditure in computing his taxable income. It is under that rule that this special allowance that the hon. Member referred to is given to some clergymen, but as such it is something which is quite different from what is now proposed, which is a special form of disability allowance.
We discussed at length in Committee the possibility of a general tax relief for disabled persons, and I explained to the Committee at some length the reasons why we, like previous Administrations, much as we should like to, have been


unable to find a satisfactory administratively workable solution to this problem. All I need say about this specific proposal is that we cannot think it would be right to single out from this general field for a special relief those disabled persons who, because of their disability, employ domestic help. I am sorry to have to fulfil the hon. Lady's prophecy but my advice to the House must be to reject the Clause.

11.30 p.m.

Mr. Paul Dean: I am sorry that the hon. Member for Manchester, Exchange (Mr. Will Griffiths) has left the Chamber. He made a wholly unwarranted attack on my hon. Friend the Member for Finchley (Mrs. Thatcher). Anyone who remembers her record at the Ministry of Pensions and National Insurance and the extent to which National Insurance benefits were then increased, in particular for widowed mothers, will recognise how unwarranted and unjustified that attack was.
We have had from the Financial Secretary a disappointing reply for the third time during the Finance Bill on these social service subjects. In Committee he granted one concession, namely, in respect of tax relief for the blind, for which we were all very grateful. I gained the impression from listening to the hon. and learned Gentleman for the third time on these subjects, that the whole concept of tax relief for conditions of this kind is anathema to him. I appreciate that, in view of present economic conditions, his arguments on the details carry some weight. However, I have the suspicion that, far from intending to re-examine the whole question of tax relief for the disabled or for people with special responsibilities, such as caring for children or for the elderly, the Government are rather hostile to the whole idea of extending these arrangements. Yet, as my hon. Friend the Member for Finchley said, we are not suggesting giving something to people. We are suggesting leaving a little more of their own money in their own pockets to enable them to meet the special expenses which they have owing to their condition, to their responsibilities, or to their disability.
If we believe in encouraging people to provide for themselves as far as possible without social security benefits, it is surely right to encourage them in the way we

suggest. These two Clauses deal with two types of people who have special responsibilities and who incur special expenses. My hon. Friend the Member for Barkston Ash (Mr. Alison) made out a particularly strong case for tax relief for disabled people who are able to go out to work. It is both economically and socially right that people of that type who are prepared to take on work should be encouraged to do so. However, if the effect is to be, not only that they lose social security benefits, but also that they will lose the assistance which they have been getting in the domestic help which they must have, the disincentive is too great for them. I am very disappointed with the arguments adduced by the Financial Secretary.

Dame Irene Ward: I am not in the least surprised that the Financial Secretary got up so quickly to give us negative replies to these two Clauses. I always find, and I am not condemning the Financial Secretary alone, that it is much more difficult to get time to discuss these very human problems in this House than to discuss a great many other problems. I was not surprised that, as he was going to deny the two Clauses, he wanted to get it over very quickly, in the hope that perhaps some other people would not want to take part in the debate.
I support both new Clauses with all the force I can command. I am not going over again all the points so admirably made, but I want to make one point about the widowed mother, the only one that my hon. Friend the Member for Finchley (Mrs. Thatcher) omitted from her excellent speech.
It is this. A widowed mother—and this distinguishes her from a widow—generally speaking, has very little chance, with her child or children, of ever improving the standard of living of the family.
My mother was widowed very early in life, and I say very strongly and forcefully that once a family loses the main supplier of the household needs and income, there is very little chance of an improvement of the standard of life of that family until the children grow up.
One can do a great deal to relieve general hardship and maintain a reasonable standard of living, particularly if


the widow takes on the burden of being the breadwinner, but when there is a father, if he is at all a good type and works hard in industry or a profession, as the years pass, he moves up the ladder and gets a higher salary.
I am not going to argue about all the difficulties that women face in the working world. We all know that they have many to face. One of the difficulties we have to remember is that a widowed mother with a family is struck practically when the father dies, and the Financial Secretary's argument about the difference between the widowed mother and the widower ought, perhaps, to be seen in this perspective. Treasury spokesmen always take up the difficulties in all these Clauses about making concessions which are not going to be fair to other people.
I know that I should be out of order if I continued very long about this, but perhaps I will be permitted to say that in the debates on the 10s. widow, the 10s. widow—[Interruption.] I always give people their due, which is what the Treasury Bench do not do.
The Labour Government operated that pledge—one of those they gave at the time of the General Election—they gave the 10s. widow what they promised her, but they left the no-shilling widow, so that in this matter of equality between one person and another in relation to taxation reform or social reform there are plenty of anomalies to be dealt with. I hope that I shall live long enough to see some of them dealt with.
My other point relates to the Clause in the name of my hon. Friend the Member for Barkston Ash (Mr. Alison) who spoke of the difficulty of personal assessment. One realises that in these matters there are very great difficulties, but the case mentioned by my hon. Friend can be accentuated by thousands of others. There was the interesting case of a woman teacher whom it was sought to attract back to the teaching profession. She was allowed to work half-days and at the end of her week's work she was allowed to have her salary made up by National Assistance. If that is not going rather outside the general scheme of fairness, I wonder what is. I know that this was within the law. I have already taken up the case with the Chairman of

the National Assistance Board, because I can think of many people who deserve a little more than they get.
If that was not a special arrangement made to suit a particular person, what is? I would be foolish if I did not realise it as something special. If these cases were put to the country, I know what the country's answer would be. It is a pity that the Treasury Minister does not know the answer himself, or perhaps he would say that he was too busy to get the Treasury officials to look into all these cases—and I am not a bit surprised.
Having voiced my support of these Clauses, I want to deal with the absolutely monstrous attack that was made by the hon. Member for Manchester, Exchange (Mr. Will Griffiths). [HON. MEMBERS: "Where is he?"] I would not care if I never saw him again. I do not mind whether he is here or not. He made only one point with which I agree. Quite a number of hon. Members and others outside the House wonder that the Parliamentary system seems to involve one in saying one thing when in government and another thing when in opposition. But there is a very subtle difference between the present Government and the Opposition. We on this side of the House, when in government, may not have gone quickly enough—and goodness knows, I have said that very often. Indeed, if my hon. Friend the Member for Finchley had been the Minister of Pensions and had had her way, we would have gone a bit further than we did.
I want to accentuate the difference between the present Government and the Opposition. We never made promises—[HON. MEMBERS: "Oh."] It is quite true that we might not always have taken action, but we did not make promises and then fail to take action. The attack by the hon. Member for Manchester, Exchange was most discreditable. It is true that there were two specific pledges, one of which was that retirement pensions would be increased. That pledge was carried out, and I am bound to remark that it was a woman who was in charge of the Ministry of Pensions and that if she had had backing for what is now the subject matter of these new Clauses and the men in the Government had been fair in the matter, it would have been


better for the solution of this human problem today.
11.45 p.m.
I am concerned with the 10s. widow and the increase in retirement pension. I am in politics in a difficult part of the country where I meet the full force of Labour promises which are made day in and day out. They may not appear in the Labour Party manifesto but party workers go round and say, "We will do this and we will do that," and then nothing happens. When my party was in government and hon Members opposite were the Opposition we may have gone slowly. Indeed we did, and I do not mind attacking my party when I want to. I reckon that it takes a long time to win a battle and that if there were more women Ministers we would win more social battles, because women understand social problems generally much better than men do. I except the excellent speech of my hon. Friend the Member for Barkston Ash. During those thirteen years—

Mr. Thomas Steele: On a point of order. Are we fighting the last election or are we dealing with the new Clause?

Mr. Deputy-Speaker (Sir Samuel Storey): I understand that the hon. Lady Lady the Member for Tynemouth (Dame Irene Ward) was referring to an attack made upon the hon. Lady the Member for Finchley (Mrs. Thatcher) who moved the new Clause.

Dame Irene Ward: The attack was on what my hon. Friend did in the last Parliament and there has been an election since then. I sat on the benches opposite for 13 years and heard dozens of promises made, Motions and Bills moved and new Clauses to Finance Bills voted on in the Lobby by hon. Members opposite and now that they have the chance to do something we have this pettifogging, idiotic, negative reply to the debate. Although I have been occasionally critical of my party when in office, I would much prefer to belong to a party which moved slowly, without making promises which were not kept, than to a party which made dozens of promises and talked about millions of Bills and Motions and then when it had the chance could not implement any of them. The speech of the

hon. Member for Manchester, Exchange was absolutely despicable and appalling.

Sir Keith Joseph: The Government will realise that a number of my hon. and right hon. Friends feel strongly on this subject and particularly about the attack made on my hon. Friend the Member for Finchley (Mrs. Thatcher). In the course of the debate we have heard some thorough and lucid speeches on cases which deserved to be put and studied. But I wish at once to comment on the attack on my hon. Friend made by the hon. Member for Manchester, Exchange (Mr. Will Griffiths), who has now left the Chamber.
The hon. Gentleman alleged that because my hon. Friend the Member for Finchley was in office as a member of the Tory Government at the time when a Private Member's Bill of his to abolish the earnings rule for widows had not been given leave to be introduced and passed through the House, her speech was one of hyprocrisy. Anyone who has been in Government, and asks later for something new, would be open to the charge of hypocrisy only if it could be sensibly alleged that any Government could in their period of office do everything that needed to be done.
While my hon. Friend was at the Ministry of Pensions and National Insurance, the allowance for each child of a widowed mother was increased by no less than 50 per cent., and that 50 per cent. increase was not subject to the earnings rule however much the widowed mother earned and was far more valuable as a first priority for the benefit of widowed mothers than any relaxation of the widowed mothers earnings rule, although continuous relaxations of that earnings rule were made while the last Government were in office and while my hon. Friend was at the Ministry concerned. So I reject, and I hope the House will emphatically reject, the allegations made by the hon. Member for Manchester, Exchange, who, I see, has now returned to his place.
My hon. Friend the Member for Barkston Ash (Mr. Alison), in a particularly trenchant and persuasive speech, put a case which deserves the closest study, but the Government have embarked upon the argument that this is not a year for relief and neither are these the categories


to which they would choose to give priority. It is no light thing for the Government to discourage, as the Financial Secretary's answer does, people who, despite heavy burdens, are seeking as far as lies in their power to support themselves. I hope that our arguments will be carefully studied by the Government. The cases have been forcefully put, but the Government are in obdurate mood. As there is so much further business before the House, I shall not advise my right hon. and hon. Friends to divide on the new Clause.

Question put and negatived.

New Clause.—(EXEMPTION FOR MOVEABLE PROPERTY ACQUIRED BEFORE 6TH APRIL.)

Notwithstanding anything contained in any other Part of this Act, there shall be no tax chargeable in respect of a gain accruing on a disposal of an asset which is tangible, moveable property and which was acquired on or before 6th April 1965.—[Mr. Ridley.]

Brought up, and read the First time.

Mr. Nicholas Ridley: I beg to move, That the Clause be read a Second time.
We discussed the question of chattels in Committee, and, at 3 a.m. on the morning of 26th May, the Financial Secretary rose to speak and said that he hesitated to intervene when other hon. Members wished to speak. After his speech, the Patronage Secretary moved the Closure, and the matter was then disposed of, but, plainly, the whole question has not been properly discussed, even in the opinion of the Financial Secretary. The hon. and learned Gentleman was both intangible and immoveable on the subject, and my hon. Friends and I have, therefore, put down this new Clause to try to clarify a situation which many of us find extremely unsatisfactory.
We are not seeking total exemption for chattels, and we are not seeking to raise the limit from £1,000 to a reasonable figure. We are seeking to cut out the many defects which this tax has been shown to possess by removing the retrospective element in it which is so objectionable. This Clause would limit the charge to tax to chattels purchased after 6th April. If I go through the admitted defects of the Capital Gains Tax on

chattels which the Financial Secretary has referred to and prove that this Clause effectively helps the position, I feel certain that the arguments will commend themselves to him. First, there is the question of evasion. The hon. and learned Gentleman admitted that
We must recognise that in this tax on chattels there is plenty of scope for avoidance.
Later, he said:
I am sure that as the vast majority of our people are honest, the vast majority will make honest returns. There may be some evasion or escaping, but that is not a sufficient reason to exclude this field from the tax net altogether."—[OFFICIAL REPORT, 25th May, 1965; Vol. 713, c. 469–472.]
I find that a surprising statement. I have never heard of a Government relying upon the honesty of the taxpayer before. If that is the case, why do not the Government rely on the honesty of bond washers and dividend strippers? Why not rely on the honesty of us all to pay Income Tax and Surtax without having any enforcement machinery? If a tax is not enforceable, it is, by common consent, a bad tax.
Of course the Government do not rely upon the honesty of citizens, otherwise we should not have the "snooper's" Schedule 9. The Government intend to try to enforce this tax although, on their own admission, there is not really proof of evasion. I believe that widespread evasion of the tax will bring it into disrepute and therefore that it is better to have a tax which would be accepted as fair. This new Clause would, therefore, limit it to future operations.
That brings me to the second point where the hon. and learned Gentleman's argument was deplorably weak. He himself admitted that difficulties arose in this respect. I emphasise the arbitrariness of both the possible methods of valuing chattels for the purpose of the Capital Gains Tax—the retrospective valuation of the value on Budget day and the "straight line" method which is spelt out in the Schedule.
I think that all of us have a healthy dislike of retrospective valuation of any sort and it is to this that we principally object in the present proposals. How can one possibly say what the value of a thing was some 10 or maybe 20 years ago, which will be the problem when


this tax comes to be administered? It is particularly difficult in the case of a work of art, because these things fluctuate so much and there can be no real knowledge as to what the value would be.
The only conceivable result of all this will be a certain amount of horse trading between the taxpayer and the Inland Revenue arriving at a compromise probably involving large sums of money. That will be a most unsatisfactory state of affairs. The letter in The Times yesterday from the Chairman of Sotheby's drew attention to this. He recalled the case of the Paris commode which the Government experts valued at £12,000 too low and objected that, owing to the difficulties of valuation, the owner could have been unjustly assessed for Capital Gains Tax on a notional gain of over £12,000. He concluded that retrospective valuation could not help being arbitrary to some extent and added:
…I have no doubt that the tax could not be operated in practice without substantial injustices.
That is also our conclusion.
I believe also that the "straight line" valuation method is a much more pernicious method than the hon. and learned Gentleman has been prepared to tell the House. Amendment No. 230, which has been selected for discussion later, will attempt to deal with the iniquities of this method of valuation. It will suffice at this stage if I briefly state what it is we object to, and perhaps we can have an opportunity for a fuller debate when we reach that Amendment.
12 m.
Many works of art will have been given or inherited, perhaps free of duty, or purchased, so that no idea of their value remains, as much as 80 years ago. This will be the base value from which the gain is to be computed. That will mean that in order to compute the value, valuers will have to go back, perhaps as much as 80 years in extreme cases and certainly often 60 years, to see what was the value of a work of art or other chattel at that time. When family possessions have been handed down, there will often be no evidence of value and probably no insurance value.
The gain is to be worked out on the basis of the sale price and to that gain is to be added a factor which takes account

of the gain between 1945 and 1965. That works out in a complicated ratio the amount of the gain which is applicable to the taxpayer. The more the formula is studied, the more unfair it is seen to be. This, again, involves the unwholesome element of retrospective valuation and when the taxpayer is still alive at the age of 90, or has died at the age of 100, the retrospection could be over as much as 80 years. That in itself is a mammoth objection to the tax. In the new Clause we propose to cut out retrospective valuation by not including any chattel purchased before Budget day.
The third argument concerns the effect on the art market. The Financial Secretary admitted that if there were an alteration in the situation and the tax were seen to be affecting that trade, the matter could be considered for revision for another year. However, my hon. Friends made the point that it was only necessary for the French or the Germans or the Americans to reduce their own taxes and they could recover the predominant position which our art market now has, and it would then be too late. The damage would have been done.
I advise the Financial Secretary to put off the start of this tax by accepting the new Clause which will give us a few years before it begins to bite and before many transactions take place which will be chargeable to tax. Let us think very carefully before going into something which may do immense damage to a valuable export earning asset.
The fourth argument is that the Financial Secretary has admitted that the tax will yield very little if anything. He did not base his case on the yield and still does not base his case on the necessity for the tax to yield. His principle was based on the argument that it was necessary to create an atmosphere of social justice, as he called it. He said:
As everybody knows, very substantial gains are made on some chattels. These attract a great deal of publicity and attention. If we were to exempt all chattels, and people were to hear and read of these gains being made and find that these are exempt from all charge, it would tend to bring the whole tax into disrepute."—[OFFICIAL REPORT, 25th May, 1965; Vol. 713, c. 467.]
There are several comments to make about that defence, which is terribly weak. First, it is akin to gambling when there is a satisfactory appreciation in the


price of a picture or piece of furniture. Why tax this form of gain when we are not to tax gambling? This question has been posed before, but the Financial Secretary has not attempted to provide a convincing or logical answer to it. When one gets into this field of spectacular gains in works of art, one is alongside the same field as football pools, horse-racing or gaming wins, and I think it is unfair to administer the tax on one of those and leave the others to go more or less scot-free.
The next point is that the gain, in many cases, is due to the effects of inflation. By 1970, probably, the value of money will have halved since 1945. One will, therefore, be charging 30 per cent. on a gain where there has probably been no appreciation in real value at all, because the inflation since then will have eroded away the real value. Again, at these low levels, the tax becomes a tax on the inflationary increment in the value of a possession.
What I object to is that this is the argument of envy. I do not believe that we should encourage taxes which are based on envy and jealousy. Do other emoluments which attract envy get taxed? Hon. Members of this House have just put up their salaries. Is not this attracting envy from outside? Should not this be more heavily taxed? What about the Ministers sitting opposite who have just put up their salaries by a spectacular amount? Does not this bring the whole tax system into disrepute? I do not see that this argument holds water at all. I think that it is illogical to do great damage to the art market, and great damage to the nation's standing as a centre of collections, and as a market for works of art and chattels—to put all this on the State as part of a bargain which is already beginning to crumble.
The Financial Secretary tells us that social justice will mean that he will get wage restraint for the policy of his right hon. Friend, the First Secretary. Already a coach and horses has been driven through this Bill. Already the wages front is crumbling. Are we still to throw the art market on to the scrap heap although the other half of the bargain is not carried through? I believe that if we had achieved wage restraint, if we

had had the other side of the bargain, anything would be acceptable to achieve it. But already organised labour has demonstrated that it does not give a fig for the Capital Gains Tax, and I do not think it is right to create a tax which can be avoided by the dishonest, with such admitted difficulties in administration and valuation that it could do great damage to the London art market, and which is partly a tax on inflation and partly a tax on gambling wins, when it yields nothing, or very little at all, and its primary objective has already fallen through. For these reasons, I urge the House to accept this new Clause, which will remove quite a lot of the defects in the Bill.

Sir C. Mott-Radclyffe: I can briefly reinforce the arguments put forward by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). The object of the Clause is to bring the application of the Capital Gains Tax, in terms of chattels, out of the realm of the hypothetical, into the realm of the practical. To value any chattel acquired since April, 1965, is a fairly easy operation. It also has the merit that the chattel was purchased with the knowledge that, if it was sold, Capital Gains Tax would arise. But to value anything acquired before April, 1965, may be 20, 30 or 40 years before, presents enormous difficulties.
It is precisely these enormous practical difficulties which we believe the Government have totally under-estimated. I expect that the Financial Secretary has had his attention drawn to the Inland Revenue's memorandm, published 10 years ago, in the Report of the Royal Commission on the Taxation of Profits and Income. It contained some pungent observations. I will read one very short extract, dealing with the problem of ascertaining what is called the cost of acquisition. The memorandum said:
To administer the tax efficiency would require continuous search of the national and local press and other periodicals to follow up any information as to sales of property of any kind not already returned for assessment. This would entail a vast amount of work and it might be extremely productive. On the other hand it might prove to be unremunerative. All such work … would call for a high degree of skill and intensive effort; and inquiries and negotiations would be delicate, difficult and long drawn out.


That summarises in pretty succinct form the problem which the hon. and learned Gentleman and his colleagues are trying to sort out.
Where are all these professional valuers to be found? When we asked this question during the Committee stage the Minister said that he did not know. He does not know how many extra valuation officers would be required to carry out the implications of the Capital Gains Tax Clauses.

Mr. Ramsden: I should like to give the Financial Secretary the opportunity to clear up a point. He told us during the Committee stage that he had some valuers in training, but in answer to a Parliamentary Question I put down later he said that there were none in training, and it would be useful to have an elucidation of the position.

Sir C. Mott-Radclyffe: That is a point I was coming to. One leading firm of art dealers in London will not allow members of its staff to purchase any picture unless they have had 15 years' training. That is the degree of expertise the firm thinks necessary to arrive at any accurate valuation at all.
No professional valuer, however skilled or experienced, could conceivably have forecast with any degree of accuracy the results of the sales of the Spencer Churchill collection of pictures a few months ago. I must say this to the Financial Secretary. His right hon. Friend the Minister of Housing and Local Government, when we were debating the Rent Bill the other day, really was much more frank about the problem of professional valuation officers than the Financial Secretary has been. If I recollect correctly, when we were discussing whether rent officers should or should not have professional qualifications in order to value property, the Minister of Housing and Local Government frankly admitted that it was impossible to find sufficient rent officers with the necessary professional qualifications.
The question to which we want an answer is where are these extra valuation officers to come from? Who is to train them, and does the Financial Secretary realise the extent to which expert knowledge will have to be applied in valuing every sort of chattel over an enormous range?
The Financial Secretary continued, throughout the Committee stage, to take refuge behind the argument that this problem of valuation is not new because in Estate Duty much the same procedure has to be followed on every occasion. But with great respect, the Financial Secretary is not comparing like with like.
The problem of valuation for Estate Duty is quite unlike the problem that is going to arise in trying to value every single chattel sold for more than £1,000 in relation to what it might have been worth on Budget day or on the longer apportionment basis for this reason. The procedure for valuation for probate is well laid down. One is valuing the property of somebody on the date of his death, and, broadly speaking, the executors and the Estate Duty officials are trying to agree and there is rarely dispute except occasionally on one or two items.
12.15 a.m.
When one is valuing chattels for the Capital Gains Tax, it is a totally different problem. One is not only valuing chattels on the date of a death; one is valuing them on the date of a death or sale in relation to what they might have been worth had they been sold on Budget day or perhaps very many years further back. It is a totally different problem of enormous magnitude. I ask the Financial Secretary to come clean and admit that he has no conception of the task upon which he has embarked, and to give the House some idea of how he proposes, purely on what I might call the nuts and bolts of the Capital Gains Tax in relation to chattels, to apply it with any degree of fairness, or whether he proposes to apply it simply on a hit and miss, rule of thumb basis which might be 100, 200 or 500 per cent. in error.

Mr. Robert Cooke: Even at this late hour, I feel bound to make a small contribution in support of the new Clause moved by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). I am happy to be able to do it in a somewhat quieter House than was the case on a previous occasion when we tried to ventilate the grievance of everyone interested in the future of works of art and the public enjoyment of them all over the country. On that occasion, in the early hours of the


morning, I had a gang of some 60 members of the Government Party screaming abuse throughout my speech. Tonight, we have had one hon. Member shouting "Rubbish" at my hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe), though the hon. Member did not see fit to rise to his feet. No doubt he will later.
I am glad to support by hon. Friend on the new Clause he has moved. [Interruption.] Does the hon. Member wish to intervene?

Mr. Deputy-Speaker (Dr. Horace King): The hon. Gentleman who is seeking to address the House will do better if he speaks to the new Clause.

Mr. Cooke: I am grateful for your guidance, Mr. Deputy Speaker. When one is continually interrupted from a sedentary position, one is liable to be drawn aside. I apologise, and address my remarks to you, Sir.
The merit of new Clause 41 is that it excludes chattels bought or inherited before Budget day, 1965, and it therefore removes any element of retrospection. Although the gains made—or losses, for that matter—were not taxed before that day, there was the vexed question of a valuation which might have been made years before and which had to be proved. The person concerned had a right to opt for that method of valuation, and the merit of our new Clause is that it avoids the arbitrary cutting of the line which has to be drawn on the time and value formula set out in the Bill. It would make the whole procedure much more straightforward, as well as removing the element of retrospection which we find wholly unacceptable.
Having said that in favour of the new Clause, I must say that I see it very much as an attempt at a temporary relief and an avoidance of the onset of what we regard as an iniquitous tax because of its effect upon the public enjoyment of the arts and because it encourages the hiding away from public view of works of art for fear that they should be caught. As my hon. Friend the Member for Windsor said, the art market will be severely damaged, and the possibility of works of art being lent or even given to museums and galleries will be reduced. It is even

more iniquitous because of the motive behind it.
One of the arguments which were used by the Financial Secretary was the view that to exempt chattels altogether would bring the tax into disrepute. I ask, with whom? With the baying Left wing of the party opposite? Certainly the country does not want this tax.

Mr. Stanley Orme: Yes, they do.

Mr. Cooke: The baying Left wing are already at work. This aspect of the Capital Gains Tax is not wanted by the country. If it is necessary at all, our new Clause would go some way to make the tax workable. Above all, if we are to have taxes, they should be workable.
We have heard that the chances of getting a reasonable yield from this tax are fairly slim. Acceptance of our new Clause might at least make it more realistic. In that sense, therefore, we are helping the Government. We must, however, hope that it will not be long before we see the whole clumsy apparatus swept away and Britain once again become the free centre of the international art market of the world.
It is ironic that the party who shouted so loud about the need to help the arts should for squalid political reasons persist in taxes which will destroy them. The whole arts policy of the Government is a farce. We always knew that from the moment—

Mr. Deputy-Speaker: Order. The hon. Member must not range as wide as that.

Mr. Cooke: I apologise, Mr. Deputy-Speaker, if I have been carried away into going beyond the new Clause. The point which we make is that although we regard this as an utterly iniquitous tax, our new Clause would at least make it workable, so that in that respect we are being realistic.
The point of the new Clause would be that the Treasury influence on the arts would be to some degree lessened. We in this party always suspected that as soon as the Treasury lost anything to do with the arts, as soon the arts were taken away from the Treasury and put elsewhere and the Treasury was able to act independently, they would have a pretty poor do, and that is what they are getting now.

Mr. MacDermot: I should, perhaps, intervene because we have reached the position that all the arguments which are being adduced to the House are either repetitive or out of order. That is nothing new in these debates on chattels. We had 2¼ hours on this subject on the occasion, to which the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) referred, when the Closure was moved. What the hon. Member omitted to tell the House was that immediately afterwards we started another debate on the same topic in which all the arguments were repeated for another hour. That was the occasion when the hon. Member complained that I was not listening and I assured him that as soon as he addressed a new argument to the Committee I should be delighted to open my eyes but that meanwhile I was following every word of his with the utmost attention.
The hon. Member began by saying that the new Clause would remove the retrospective element which is so objectionable. There is no retrospective element in the Capital Gains Tax. It applies only as from Budget day and there is no taxation of any pre-Budget day gains. I say no more about that argument.
The hon. Member then proceeded to raise the main argument which is adduced in support of the new Clause, and which was argued further by his hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe), concerning the alleged valuation difficulties. The hon. Member claimed that his new Clause would cut off what he calls retrospective valuation, by which he means valuation of a chattel at a past date. In most cases, of course, for this purpose valuation will be as at Budget day.
The hon. Member is quite wrong in his claim that if we accepted the new Clause it would cut out all retrospective valuation. As he has pointed out, the need to value at a past date arises where a person has acquired a chattel other than by purchase, if for example he has done so by gift or inheritance, so that there is no firm base-date purchase price on which to work; and, therefore, one must proceed to a valuation. We would still be confronted with exactly the same problem if we accepted the new Clause.
The hon. Member proposed that the Capital Gains Tax should apply only to assets acquired after Budget day. In the

case of assets acquired after Budget day by gift or inheritance, there would still be the same problem of what the hon. Member calls retrospective valuation. All that that would do would be to eliminate part of the requirement for that kind of valuation, namely, all chattels held on Budget day.
I repeat again the main answer given to this point during the Committee stage, which is that the fears which have been expressed on this point are grossly exaggerated, because it is assumed that every chattel worth more than £1,000—and we are not talking of any others—will have to be valued, but where there is a requirement to get the value of the article on Budget day for the purposes of obtaining the post-Budget day gain, then in the vast majority of cases it will be in the interests of the taxpayer to accept and to adopt the time apportionment basis. In those cases where there has been a pre-Budget day sale price to work on, the taxpayer in the vast majority of cases will be only too content to adopt the straight line basis because it will operate to his benefit.
If he does not, then it would probably be because he has had expert advice that the true valuation is lower. Then, he would opt for the valuation and tender his valuation to the Inland Revenue and the matter would be dealt with in the same way as these matters are dealt with for the purposes of estate duty. The object there, the hon. Gentleman says, is to reach agreement; but the same applies in the Capital Gains assessment. Both parties will want to reach agreement, and if a valuation is tendered by a reputable expert dealer, the greatest weight will be given to it by those who handle these matters from the Revenue point of view.
I was asked a number of hypothetical questions about where we shall recruit all the expert art valuers; but this is not dealt with by expert art valuers for the Revenue, and there is no contradiction as has been said about our answers. I was asked different questions. First, I was asked what additional staff would be employed by the Inland Revenue and what steps the Government was taking to gain that staff. I have already said that there are persons in training, but they are in training to be members of the Revenue valuation staff. Then, the


hon. Member put down a question for written answer which was directed specifically to art experts in training. I can tell him there are none. This is not the way these matters are dealt with.

Mr. Robert Cooke: Could the Financial Secretary answer this one straight question? Is it not the fact that the time apportionment formula could only act to advantage if the work of art appreciated in a steady and wholly uniform fashion throughout the whole of its existence?

Mr. MacDermot: Let us assume that the article was bought for £1,000 ten years ago; to be precise 10 years before Budget day. Let us then assume that it was disposed of two years after Budget day for £20,000 and assume that the real appreciation in the value of that article took place in the last two years before it was sold again, because suddenly, if it is a painting, that artist came into vogue and the price of his pictures appreciated very considerably in those two post-Budget years. There would have been a very large post-Budget day gain, but, by adopting the time apportionment system, he would have to pay tax on only one-sixth of the gain over the 12 years when, perhaps, about three-quarters of it had taken place in the last two years.

Mr. Robert Cooke: rose—

12.30 a.m.

Mr. MacDermot: I will not give way again. The hon. Gentleman asked for a straight answer to a straight question. He has had it.
The final argument which I address against the new Clause is that it would give a quite unwarranted preference to moveable as against immoveable assets. It is proposed to exclude completely from liability to charge any moveable asset which has been acquired by the taxpayer before Budget day which is in his ownership at the time of Budget day. This does not apply to land: it is not suggested that it should apply to land. The new Clause is confined solely to moveables. The purpose of Capital Gains Tax is to apply a comprehensive tax to all assets of the kind falling within charge and to make it applicable to gains as from Budget day. There is no reason

in equity or justice to single out chattels for different treatment from immoveable property.
The only argument put forward in support of the new Clause is that our proposals produce some unworkable administrative problem for the Inland Revenue. I can assure the House that, if that was the view of the Inland Revenue, we would feel it our duty to make it plain to the House.
The hon. Member for Windsor referred to some evidence given before a Royal Commission 10 years ago. Whatever views may have been expressed then, I assure the House, as I assured the Committee, that the Revenue is satisfied that the proposals in the Bill are workable and that we have received no advice to the contrary.

Mr. John Hall: I yield to no one in the House in my admiration for the Financial Secretary's great skill in giving a semblance of reason to an unreasonable case. He appeared to answer some of the arguments advanced so powerfully by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who deployed an extremely good case in support of the new Clause. The hon. and learned Gentleman managed to skate over some of the points put by my hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe), especially when my hon. Friend drew attention to the anxieties expressed by the Inland Revenue. The hon. and learned Gentleman treated this with a certain amount of disregard. He rode off the difficult question of the recruitment of valuers and the difficulty of valuation, which are very real points which will produce many difficulties.
The Financial Secretary knows as well as anybody in the House that of all the provisions in the Bill these are among the most chaotic, confused and ill thought out. It is clear that they will not work. Nevertheless, we have had a considerable debate on this subject both in Committee and today. The point of view of my hon. Friends has been fully deployed. We believe that the provisions are likely to be unjust and, what is more, unworkable. However, we still have a fair amount to do, and therefore I would not advise my hon. Friends to divide on this issue, if only for the reason that we


believe that these provisions are unworkable. They will break down and will not operate effectively, if only because of the absence of skilled and suitable personnel to make them operate.

Question put and negatived.

New Clause.—(RATE OF CAPITAL GAINS TAX FOR UNIT TRUSTS AND INVESTMENT TRUSTS.)

The rate of tax payable by a unit trust or by an investment trust approved by the Board for the purposes of sections 34 and 63 of this Act on any chargeable grant accruing in any accounting period (as calculated in accordance with section 51 of this Act) shall not exceed that payable in that period by an individual under section 19(3) of this Act.—[Mr. Peter Walker.]

Mr. Peter Walker: I beg to move, That the Clause be read a Second time.
New Clause No. 43 is a Clause of fundamental importance to unit and investment trusts. The arguments involved are those concerned with seeing that the individual investor investing in both unit trusts and investment trusts does enjoy a position similar to what he would have enjoyed if he had been an individual investor. I hope that in considering this Clause the Government will have been able to reflect in the period between the Committee stage and Report stage of the Bill, exactly how important the investment and unit trust movements are.
On the investment trust movement, it has already been mentioned in the Committee stage that about £3,000 million are invested through the media of investment trusts. It is also known what a widespread movement the unit trust movement is. I have a connection with the unit trust movement through its rebirth after the war. Together with one of my right hon. Friends, we started the first unit trust after the war. As far as this new Clause and other Amendments are concerned, I would say that I would in no way benefit from them going through.
Both sides of the House have come to recognise what an important movement this has become, and we have seen in recent years the trade union movement take an interest in this form of investment. We have seen the party opposite even talk about the possibility of a national unit trust as a medium to encourage savings. From the point of view of the Chancellor's economic policy, there is no period when it has been more important to encourage

savings than at present. I am sure that the Chancellor must at this time be very concerned at recent figures of National Savings. I am sure that he must show some concern at savings in the form of private investment, such as investment and unit trusts. The House will be disturbed to know that unit trust sales, during the first five months of this year, have been 25 per cent. lower than in the similar five months last year. This is the first period for many years, certainly since, I think, 1957, in which there has been this drop in sales of this type of investment.
From the Chancellor's point of view it possibly means that people with the higher earnings and higher incomes that they are enjoying at present, instead of saving are spending and this does put an unwelcome inflationary pressure upon the economy which I am certain the Chancellor would not like to see at present. Therefore, the criticism of this side of the House has constantly been that this Finance Bill rather than encouraging saving has been an actual deterrent to saving.
There is no sphere where this is more obvious than investment and unit trusts. The capital gains that take place within the unit or investment trust will be taxed at 35 per cent. The Chancellor has indicated that there is the possibility in another Budget of this being raised to 40 per cent., although he hoped that it would not be more than 40 per cent. We heard earlier this afternoon from the Financial Secretary that under some proposed Amendments which might be accepted by the House and which are being moved by the Chancellor at a later stage, we would have a situation that a person paying the standard rate of Income Tax would be paying Capital Gains Tax at a level of 20 per cent.
It means, if the Chancellor went to 40 per cent., that by investing through a unit trust for a period a person will be subject to 40 per cent. or 35 per cent. tax whereas, as an individual, he would only be subject to 20 per cent. tax.
Thus for that period, before taking advantage of any credits which are given to them—most unit and investment trust holders are long-term holders—they will be at a disadvantage, to the extent that the Chancellor has taxed them at the rate of 35 per cent. or 40 per cent.,


whereas as individuals investing in those same underlying securities and disposing of the same underlying securities they would be taxed only at 20 per cent.
The purpose of the Clause is not even to reduce it to the average rate that will be paid by the individual. It is not to reduce it to the rate paid by the individual paying the standard rate of Income Tax. By the Clause we are trying to secure that the normal rate of 30 per cent. applicable to the individual shall be applied to unit and investment trusts.
Many Amendments which we moved in Committee were then opposed by the Government, although they have now tabled similar Amendments. I hope that this will be another matter on which they will decide to change their attitude. I hope that they will decide to change their attitude in view of the latest figures on savings. I hope that they will change their attitude in view of the general depression which exists among the investing public and savers.
On our attempt to delete the double taxation effects and during the discussions on unit trusts we heard many speeches from both sides of the House on this subject. We heard several hon. Members opposite support this general viewpoint. On several occasions the hon. Member for Orpington (Mr. Lubbock) pointed out how damaging the higher taxation in terms of the unit and investment trust movement has been, in that it has discouraged the small investor. The principle outlined as a great doctrine by the Chief Secretary has been somewhat breached, in view of the Government's attitude to charities and unit trusts. The Chief Secretary has seen the importance of some provision so that people paying no Capital Gains Tax will pay no Capital Gains Tax within a unit trust.
I hope that the right hon. Gentleman will, in view of this, also ensure that the same provision applies to the great mass of people who use this movement as a medium of saving. One easy way of achieving that end would be for the Government to accept the Clause.

Mr. Geoffrey Lloyd: I support the Clause. It is broadly true that under our present system one can save or invest either as an individual or in corporation through investment trusts without any

disadvantage. I do not think that there is any disadvantage attached to corporate saving through an investment trust. Under the system the Government propose there is now a heavy disadvantage on savings in an incorporated form. The Chief Secretary admitted this in earlier debates touching on this subject by saying that investors have to decide the advantages and disadvantages of the corporate form of investment.
What reason is there for putting a weight of disadvantage on this form of corporate saving, more particularly as the disadvantage becomes greater for the smaller investor because of his lower rate of personal tax from a Capital Gains Tax point of view? I think that the Chief Secretary will answer that it is important that, once a company is taxed, it should be taxed at the same rate for its Corporation Tax and its Capital Gains Tax. This would admittedly be consistent, because the Chancellor of the Exchequer himself said this of a company's profits in his Budget statement:
whether those profits arise as trading income or as capital gains is immaterial, and … they should be taxed at the same rate."—[OFFICIAL REPORT, 6th April, 1965; Vol. 709, c. 251.]
I can quite understand that the motive behind this with regard to ordinary trading companies might be that there is great simplicity in it and that it would remove the temptation from companies to dress up their accounts in the form of income or of capital gains. I can imagine that in the complicated commercial transactions of big companies it might be possible to do this and that there might be a case that the rate should be the same for such companies.
12.45 a.m.
Investment trusts are in a completely different position, because for them, capital and income are completely separated. The great majority of investment trusts, by their articles of association can never distribute their surpluses and in this Bill, to qualify for being investment trusts, it is compulsory for them never to distribute capital surpluses.
Whatever may be the case with other companies, these are a special form of company engaged in saving. They hold only securities and it is absolutely clear whether one is dealing with income or capital surpluses. The disadvantages


that might attach to different rates for Capital Gains Tax and Corporation Tax in the broad mass of companies do not apply in investment trusts and I am arguing that there is no reason in logic why the Chief Secretary should not grant this concession.
I think that it would be in the interest of saving if the right hon. Gentleman did, because that investment trust is a medium for the savings of a large number of small savers and it seems to be a pity to put an extra weight on them. The Government have here an opportunity of somewhat redressing that balance.

Mr. Grimond: I would agree with the view, which I think the Chief Secretary will express, that the debate is bound to be somewhat repetitive, as we had a debate on this in Committee. I think that the Government should to some extent judge that case for an Amendment by the volume of criticism of the Government and of support for an Amendment, as well by the arguments advanced.
I support two of the arguments which have been advanced for this Clause. There is a distinction between unit and investment trusts, and ordinary companies. Although it may be right to charge Capital Gains Tax at the same rate as Corporation Tax for ordinary companies, I think that investment trusts are simply a body of people come together for saving in some organisation.
It cannot be denied that there is some disadvantage, and it may be marginal, in investment in trusts. I feel sure that the Chief Secretary will advance against that the view that this is by no means proved and that in some cases this provision in the Bill may be an advantage to a trust, that in a short-term gain there may be advantages in the Government proposals, but I do not think that people who invest in investment or unit trusts look for short-term gains.
It is much more important to encourage that type of investor who wants to go in for longer term investment. It may be better for that type of investor to do so through a trust than in any other way. The advantages of the investment trust movement as against the unit trust movement is that one puts investment into the hands of experts and that is a sensible thing for many people to do. If the

Chief Secretary were to say, "I grant you that this is so, but, nevertheless, there are other reasons for not pressing this matter too far", I would agree; but I should have thought that the Government would want to leave this matter neutral and to put the investor through a trust, whether a unit trust or an investment trust, at no disadvantage. Bearing in mind that most of these investors are long-term investors, they will be put slightly at a disadvantage.
I think that this view is held by many people and I ask the Government to look at the matter again.

Mr. Diamond: I think that it would be convenient for me to reply as the hour is late, and to assure the Committee, and particularly the right hon. Member for Orkney and Shetland (Mr. Grimond), that the Government are conscious of the good work done by unit and investment trusts. At the risk of boring the House, I should say that the Government's attitude is, as I have said before, to encourage saving in all its forms, small and large, and that these are acceptable forms of saving.
The amount of money involved is very small indeed. We are not talking about that, however. We are talking about the principle. The arguments which have been advanced against me are those of principle and the House will, therefore, not object if I reply in terms of principle. In terms of principle, one does not want to put a marked disadvantage on those who invest through unit trusts or investment trusts, and my view is that there is no marked disadvantage in the law as it is now proposed in the Bill.
Unit trusts rarely alter their investments. Investment trusts do. As for investment trusts, many of their shareholders—I do not say the majority—are themselves companies. One therefore should have a major reason for departing from the normal application of the tax. That is absent; there is no major reason for departure. The difference in the rate of tax involved is very small indeed. At present, this is 5 per cent. more or less; I repeat what I said on a previous occasion—more or less. It could be less. It could on occasion be more. I grant that the probability is that on the majority of occasions it would be less for the personal tax, but on some occasions it would be more.
I draw attention to the fact that where companies are shareholders it is inappropriate to charge the rate chargeable to an individual, and many companies are shareholders of investment trusts. The natural way in which the tax would apply is the same as it would apply in the case of all other companies. One differentiates between the company and the shareholder. To look through the company to the individual is breaching the principle of this tax, which we have not done in any other respect and would not be prepared to do here.
It is no good hon. Members saying that they are not attracted by the idea of keeping the tax, not necessarily in a pure form but in an orderly form, because the only arguments advanced against the Bill are arguments of principle, and immediately one departs from the principle of a tax one does an injustice to some individual or other. As soon as a concession is given in one respect, one creates an injustice to somebody in a similar position though not an identical position.
Therefore, we could not accept the Clause because the rate of tax which should be borne by a corporation is that which is appropriate to a corporation. The amount involved is negligible and is not an argument on either side. It would be a major breach of the principle of the tax to attempt to look through the corporation to the individual. It would be inappropriate to regard all investment trust shareholders as individuals when, in fact, a large number of them are companies.
I am bound to repeat what has been said on other occasions—it is necessarily repetitive because we have been through all the arguments many times—that there are two major principles of taxation involved here, and there is no injustice of any discernible kind the other way round. Therefore, I could not recommend the House to accept the Clause.

Mr. William Clark: Nobody could over-emphasise the importance of savings. I know that the Chief Secretary is interested. Many times in opposition he supported Clauses moved by my hon. Friends and myself on savings and I cannot understand why the right hon. Gentleman, at this hour of the night and after such an important Clause has been moved,

takes an attitude, now that he has responsibility in the matter, which is so negative towards the small saver. He considers that there should be no differentiation for unit trust savings, but he failed to say that the unit trust is a very good medium for the small saver.
A tycoon with £10,000 or £100,000 to invest can obtain a portfolio and get a spread of investments, and if one investment goes down another goes up and an even balance is kept. The small individual saver with £200 to invest has not the same advantage, but the unit trust gives him a complete spread of investment so that whatever happens to equity shares on the market he can maintain his position. I am sure that the Chief Secretary could not deny this.
The right hon. Gentleman asked why investment trusts should have different treatment. He failed to say that most of the £3,000 million invested with these trusts was invested by charities, superannuation funds and individual investors. If one refers to life assurance funds which invest through investment trusts one is speaking of thousands and thousands of people who hold ordinary insurance policies. On charities the Government are illogical. Charities are exempt from Capital Gains Tax.
The Government cannot have it both ways. The Chief Secretary was not at all forthcoming in his criticism when he said that investment trusts and unit trusts are altogether different from the individual. More individuals are represented through these trusts than the right hon. Gentleman is prepared to admit. He continues throughout our debates to pay lip service to the Government's wish to help the small saver, but the Government do nothing about helping him. My hon. Friend the Member for Worcester (Mr. Peter Walker) moved the new Clause to give the Government the opportunity of proving that they want to do something for the small saver.
No hon. Member would deny the qualities and capabilities of the unit trust movement and its advantages to the small man, but what has happened in recent years? Over the first five months of 1964, while there was a Tory Administration, £44 million were additionally invested in unit trusts. Over the first five months of this year that figure has fallen


to £33 million. In my view, this is a serious reduction, a fall of about 25 per cent. in investment in unit trusts. Why? It has come about because of the implementation of the Capital Gains Tax and Corporation Tax as they affect the small saver.
1.0 a.m.
There is no question of tax avoidance raised by the Clause. It is designed to help the small saver. If the Government are to have deficit financing in their Budget, as they must, they must also continue to help small savings, but, as my hon. Friend pointed out, it is most unfair to charge Corporation Tax at 35 or 40 per cent. on the only medium through which the small man can invest whereas the individual would probably pay only half that rate, or, in the case of many small savers, would have no liability at all. How can the right hon.

Gentleman say that he is helping small savers if he will not concede the principle which we are pressing upon him?

If it is found that the small saver is being penalised under the Bill, and if Corporation Tax goes up in the future, the small saver must be given a way by which he can opt out. Why has the Chief Secretary turned down this most useful Clause? Savings help a man to be independent. I urge the right hon. Gentleman to think about this again because the country generally and small savers, in particular, are looking to the Government to pay active tribute to the savings movement instead of just saying that they want to help but do not think they can.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 180, Noes 166.

Division No. 238.]
AYES
[1.2 a.m.


Agnew, Commander Sir Peter
Doughty, Charles
Kershaw, Anthony


Alison, Michael (Barkston Ash)
Douglas-Home, Rt. Hn. Sir Alec
Kimball, Marcus


Allan, Robert (Paddington, S.)
du Cann, Rt. Hn. Edward
King, Evelyn (Dorset, S.)


Allason, James (Hemel Hempstead)
Eden, Sir John
Kirk, Peter


Amery, Rt. Hon. Julian
Elliot, Capt. Walter (Carshalton)
Kitson, Timothy


Anstruther-Gray, Rt. Hn. Sir W.
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Lagden, Godfrey


Astor, John
Emery, Peter
Lambton, Viscount


Atkins, Humphrey
Eyre, Reginald
Langford-Holt, Sir John


Awdry, Daniel
Farr, John
Legge-Bourke, Sir Harry


Baker, W. H. K.
Fisher, Nigel
Lewis, Kenneth (Rutland)


Balniel, Lord
Fletcher-Cooke, Charles (Darwen)
Lloyd, Rt. Hn. Selwyn (Wirral)


Barber, Rt. Hn. Anthony
Fraser, Ian (Plymouth, Sutton)
Longden, Gilbert


Barlow, Sir John
Gibson-Watt, David
Loveys, Walter H.


Batsford, Brian
Giles, Rear-Admiral Morgan
Mackenzie, Alasdair (Ross &amp; Crom'ty)


Bell, Ronald
Gilmour, Ian (Norfolk, Central)
Mackie, George Y. (C'ness &amp; S'land)


Bennett, Sir Frederic (Torquay)
Gilmour, Sir John (East Fife)
McLaren, Martin


Berry, Hn. Anthony
Glover, Sir Douglas
Macleod, Rt. Hn. Iain


Biggs-Davison, John
Godber, Rt. Hn. J. B.
Marples, Rt. Hn. Ernest


Black, Sir Cyril
Goodhart, Philip
Marten, Neil


Blaker, Peter
Goodhew, Victor
Maude, Angus


Box, Donald
Gower, Raymond
Maxwell-Hyslop, R. J.


Braine, Bernard
Grant, Anthony
Meyer, Sir Anthony


Brewis, John
Gresham Cooke, R.
Mills, Peter (Torrington)


Brinton, Sir Tatton
Griffiths, Peter (Smethwick)
Miscampbell, Norman


Bromley-Davenport, Lt.-Col. Sir Walter
Grimond, Rt. Hn. J.
Monro, Hector


Brooke, Rt. Hn. Henry
Gurden, Harold
More, Jasper


Brown, Sir Edward (Bath)
Hall, John (Wycombe)
Morrison, Charles (Devizes)


Bruce-Gardyne, J.
Hall-Davis, A. G. F.
Mott-Radclyffe, Sir Charles


Bryan, Paul
Hamilton, M. (Salisbury)
Murton, Oscar


Buchanan-Smith, Alick
Harris, Reader (Heston)
Noble, Rt. Hn. Michael


Buxton, Ronald
Harvey, Sir Arthur Vere (Macclesf'd)
Nugent, Rt. Hn. Sir Richard


Campbell, Gordon
Harvey, John (Walthamstow, E.)
Osborn, John (Hallam)


Carlisle, Mark
Harvie Anderson, Miss
Page, John (Harrow, W.)


Carr, Rt. Hn. Robert
Hastings, Stephen
Page, R. Graham (Crosby)


Channon, H. P. G.
Hawkins, Paul
Pearson, Sir Frank (Clitheroe)


Chataway, Christopher
Heath, Rt. Hn. Edward
Peel, John


Chichester-Clark, R.
Hendry, Forbes
Peyton, John


Clark, William (Nottingham, S.)
Higgins, Terence L.
Powell, Rt. Hn. J. Enoch


Cooke, Robert
Hill, J. E. B. (S. Norfolk)
Price, David (Eastleigh)


Corfield, F. V.
Hobson, Rt. Hn. Sir John
Prior, J. M. L.


Costain, A. P.
Hopkins, Alan
Ramsden, Rt. Hn. James


Courtney, Cdr. Anthony
Hornby, Richard
Redmayne, Rt. Hn. Sir Martin


Crosthwaite-Eyre, Col. Sir Oliver
Hutchison, Michael Clark
Rees-Davies, W. R.


Cunningham, Sir Knox
Johnson Smith, G. (East Grinstead)
Renton, Rt. Hn. Sir David


Curran, Charles
Johnston, Russell (Inverness)
Ridley, Hn. Nicholas


Dalkeith, Earl of
Jopling, Michael
Ridsdale, Julian


Dance, James
Joseph, Rt. Hn. Sir Keith
Roberts, Sir Peter (Heeley)


Davies, Dr. Wyndham (Perry Barr)
Kaberry, Sir Donald
Roots, William


Dodds-Parker, Douglas
Kerr, Sir Hamilton (Cambridge)
Sandys, Rt. Hn. D.




Sharples, Richard
Thorpe, Jeremy
Whitelaw, William


Sinclair, Sir George
Tiley, Arthur (Bradford, W.)
Williams, Sir Rolf Dudley (Exeter)


Smith, Dudley (Br'ntf'd &amp; Chiswick)
Tilney, John (Wavertree)
Wilson, Geoffrey (Truro)


Soames, Rt. Hn. Christopher
Turton, Rt. Hn. R. H.
Wolrige-Gordon, Patrick


Speir, Sir Rupert
van Straubenzee, W. R.
Wood, Rt. Hn. Richard


Stainton, Keith
Walder, David (High Peak)
Woodhouse, Hn. Christopher


Stanley, Hn. Richard
Walker, Peter (Worcester)
Woodnutt, Mark


Taylor, Sir Charles (Eastbourne)
Wall, Patrick
Yates, William (The Wrekin)


Taylor, Edward M. (G'gow, Cathcart)
Walters, Dennis
Younger, Hn. George


Temple, John M.
Ward, Dame Irene



Thomas, Sir Leslie (Canterbury)
Webster, David
TELLERS FOR THE AYES:


Thompson, Sir Richard (Croydon, S.)
Wells, John (Maidstone)
Mr. Ian MacArthur and Mr. Pym.




NOES


Abse, Leo
Hamilton, James (Bothwell)
Newens, Stan


Allaun, Frank (Salford, E.)
Hamilton, William (West Fife)
Norwood, Christopher


Alldritt, Walter
Hamling, William (Woolwich, W.)
Oakes, Gordon


Atkinson, Norman
Hannan, William
Ogden, Eric


Bagier, Gordon A. T.
Harper, Joseph
O'Malley, Brian


Baxter, William
Harrison, Walter (Wakefield)
Orme, Stanley


Bence, Cyril
Hazell, Bert
Oswald, Thomas


Bennett, J. (Glasgow, Bridgeton)
Heffer, Eric S.
Page, Derek (King's Lynn)


Bishop, E. S.
Herbison, Rt. Hn. Margaret
Paget, R. T.


Blackburn, F.
Horner, John
Palmer, Arthur


Blenkinsop, Arthur
Houghton, Rt. Hn. Douglas
Pentland, Norman


Boardman, H.
Howell, Denis (Small Heath)
Rees, Merlyn


Bradley, Tom
Howie, W.
Rhodes, Geoffrey


Bray, Dr. Jeremy
Hoy, James
Richard, Ivor


Brown, Rt. Hn. George (Belper)
Hughes, Cledwyn (Anglesey)
Robertson, John (Paisley)


Brown, Hugh D. (Glasgow, Provan)
Hunter, Adam (Dunfermline)
Rodgers, William (Stockton)


Buchan, Norman (Renfrewshire, W.)
Irving, Sydney (Dartford)
Rose, Paul B.


Buchanan, Richard
Jackson, Colin
Ross, Rt. Hn. William


Carmichael, Neil
Jay, Rt. Hn. Douglas
Rowland, Christopher


Coleman, Donald
Jeger, George (Goole)
Shore, Peter (Stepney)


Conlan, Bernard
Jenkins, Hugh (Putney)
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)


Crawshaw, Richard
Johnson, James (K'ston-on-Hull, W.)
Silkin, John (Deptford)


Crosland, Rt. Hn. Anthony
Jones, J. Idwal (Wrexham)
Silverman, Julius (Aston)


Cullen, Mrs. Alice
Jones, T. W. (Merioneth)
Skeffington, Arthur


Dalyell, Tam
Kelley, Richard
Slater, Mrs. Harriet (Stoke, N.)


Davies, Ifor (Gower)
Kenyon, Clifford
Slater, Joseph (Sedgefield)


de Freitas, Sir Geoffrey
Lawson, George
Small, William


Dell, Edmund
Leadbitter, Ted
Snow, Julian


Diamond, Rt. Hn. John
Lever, Harold (Cheetham)
Steele, Thomas (Dunbartonshire, W.)


Dodds, Norman
Lever, L. M. (Ardwick)
Summerskill, Hn. Dr. Shirley


Doig, Peter
Lewis, Ron (Carlisle)
Swain, Thomas


Duffy, Dr. A. E. P.
Lipton, Marcus
Swingler, Stephen


Dunn, James A.
Loughlin, Charles
Symonds, J. B.


Dunnett, Jack
Mabon, Dr. J. Dickson
Taverne, Dick


Edelman, Maurice
McBride, Neil
Thomas, George (Cardiff, W.)


Edwards, Robert (Bilston)
McCann, J.
Thomas, lorwerth (Rhondda, W.)


English, Michael
MacColl, James
Thomson, George (Dundee, E.)


Ennals, David
MacDermot, Niall
Tinn, James


Ensor, David
McGuire, Michael
Tuck, Raphael


Evans, Albert (Islington, S. W.)
McInnes, James
Urwin, T. W.


Fernyhough, E.
Mackenzie, Gregor (Rutherglen)
Varley, Eric G.


Fletcher, Ted (Darlington)
Mahon, Peter (Preston, S.)
Walden, Brian (All Saints)


Fletcher, Raymond (Ilkeston)
Mahon, Simon (Bootle)
Walker, Harold (Doncaster)


Floud, Bernard
Mallalieu, J. P. W. (Huddersfield, E.)
Wallace, George


Foot, Sir Dingle (Ipswich)
Manuel, Archie
Watkins, Tudor


Ford, Ben
Mapp, Charles
Wells, William (Walsall, N.)


Fraser, Rt. Hn. Tom (Hamilton)
Mayhew, Christopher
Whitlock, William


Freeson, Reginald
Mikardo, Ian
Williams, Alan (Swansea, W.)


Garrett, W. E.
Millan, Bruce
Williams, Clifford (Abertillery)


Ginsburg, David
Miller, Dr. M. S.
Williams, Mrs. Shirley (Hitchin)


Gourlay, Harry
Milne, Edward (Blyth)
Willis, George (Edinburgh, E.)


Greenwood, Rt. Hn. Anthony
Molloy, William
Wilson, William (Coventry, S.)


Gregory, Arnold
Morris, Charles (Openshaw)
Woof, Robert


Grey, Charles
Mulley, Rt. Hn. Frederick (Sheffield Pk)
Yates, Victor (Ladywood)


Griffiths, David (Rother Valley)
Murray, Albert



Hale, Leslie
Neal, Harold
TELLERS FOR THE NOES:




Mr. George Rogers and Mr. Fitch.

Question put, That the Clause be added to the Bill:—

The House divided: Ayes 180, Noes 167.

Division No. 239.]
AYES
[1.14 a.m.


Agnew, Commander Sir Peter
Amery, Rt. Hon. Julian
Awdry, Daniel


Alison, Michael (Barkston Ash)
Anstruther-Gray, Rt. Hn. Sir W.
Baker, W. H. K.


Allan, Robert (Paddington, S.)
Astor, John
Balniel, Lord


Allason, James (Hemel Hempstead)
Atkins, Humphrey
Barber, Rt. Hn. Anthony




Barlow, Sir John
Grant, Anthony
Noble, Rt. Hn. Michael


Batsford, Brian
Gresham Cooke, R.
Nugent, Rt. Hn. Sir Richard


Bell, Ronald
Griffiths, Peter (Smethwick)
Osborn, John (Hallam)


Bennett, Sir Frederic (Torquay)
Grimond, Rt. Hn. J.
Page, John (Harrow, W.)


Berry, Hn. Anthony
Gurden, Harold
Page, R. Graham (Crosby)


Biggs-Davison, John
Hall, John (Wycombe)
Pearson, Sir Frank (Clitheroe)


Black, Sir Cyril
Hall-Davis, A. G. F.
Peel, John


Blaker, Peter
Hamilton, M. (Salisbury)
Peyton, John


Box, Donald
Harris, Reader (Heston)
Powell, Rt. Hn. J. Enoch


Braine, Bernard
Harvey, Sir Arthur Vere (Macclesf'd)
Price, David (Eastleigh)


Brewis, John
Harvey, John (Walthamstow, E.)
Prior, J. M. L.


Brinton, Sir Tatton
Harvie Anderson, Miss
Ramsden, Rt. Hn. James


Bromley-Davenport, Lt.-Col. Sir Walter
Hastings, Stephen
Redmayne, Rt. Hn. Sir Martin


Brooke, Rt. Hn. Henry
Hawkins, Paul
Rees-Davies, W. R.


Brown, Sir Edward (Bath)
Heath, Rt. Hn. Edward
Renton, Rt. Hn. Sir David


Bruce-Gardyne, J.
Hendry, Forbes
Ridley, Hn. Nicholas


Bryan, Paul
Higgins, Terence L.
Ridsdale, Julian


Buchanan-Smith, Alick
Hill, J. E. B. (S. Norfolk)
Roberts, Sir Peter (Heeley)


Buxton, Ronald
Hobson, Rt. Hn. Sir John
Roots, William


Campbell, Gordon
Hopkins, Alan
Sandys, Rt. Hn. D.


Carlisle, Mark
Hornby, Richard
Sharples, Richard


Carr, Rt. Hn. Robert
Hutchison, Michael Clark
Sinclair, Sir George


Channon, H. P. G.
Johnson Smith, G. (East Grinstead)
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Chataway Christopher
Johnston, Russell (Inverness)
Soames, Rt. Hn. Christopher


Chichester-Clark, R.
Jopling, Michael
Speir, Sir Rupert


Clark, William (Nottingham, S.)
Joseph, Rt. Hn. Sir Keith
Stainton, Keith


Cooke, Robert
Kaberry, Sir Donald
Stanley, Hn. Richard


Corfield, F. V.
Kerr, Sir Hamilton (Cambridge)
Taylor, Sir Charles (Eastbourne)


Costain, A. P.
Kershaw, Anthony
Taylor, Edward M. (G'gow, Cathcart)


Courtney, Cdr. Anthony
Kimball, Marcus
Temple, John M.


Crosthwaite-Eyre, Col. Sir Oliver
King, Evelyn (Dorset, S.)
Thomas, Sir Leslie (Canterbury)


Cunningham, Sir Knox
Kirk, Peter
Thompson, Sir Richard (Croydon, S.)


Curran, Charles
Kitson, Timothy
Thorpe, Jeremy


Dalkeith, Earl of
Lagden, Godfrey
Tiley, Arthur (Bradford, W.)


Dance, James
Lambton, Viscount
Tilney, John (Wavertree)


Davies, Dr. Wyndham (Perry Barr)
Langford-Holt, Sir John
Turton, Rt. Hn. R. H.


Dodds-Parker, Douglas
Legge-Bourke, Sir Harry
van Straubenzee, W. R.


Doughty, Charles




Douglas-Home, Rt. Hn. Sir Alec
Lewis, Kenneth (Rutland)
Walder, David (High Peak)


du Cann, Rt. Hn. Edward
Lloyd, Rt. Hn. Selwyn (Wirral)
Walker, Peter (Worcester)


Eden, Sir John
Longden, Gilbert
Wall, Patrick


Elliot, Capt. Walter (Carshalton)
Loveys, Walter H.
Walters, Dennis


Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Mackenzie, Alasdair (Ross &amp; Crom'ty)
Ward, Dame Irene


Emery, Peter
Mackie, George Y. (C'ness &amp; S'land)
Webster, David


Eyre, Reginald
McLaren, Martin
Wells, John (Maidstone)


Farr, John
Macleod, Rt. Hn. Iain
Whitelaw, William


Fisher, Nigel
Marples, Rt. Hn. Ernest
Williams, Sir Rolf Dudley (Exeter)


Fletcher-Cooke, Charles (Darwen)
Marten, Neil
Wilson, Geoffrey (Truro)


Fraser, Ian (Plymouth, Sutton)
Maude, Angus
Wolrige-Gordon, Patrick


Gibson-Watt, David
Maxwell-Hyslop, R. J.
Wood, Rt. Hn. Richard


Giles, Rear-Admiral Morgan
Meyer, Sir Anthony
Woodhouse, Hn. Christopher


Gilmour, Ian (Norfolk, Central)
Mills, Peter (Torrington)
Woodnutt, Mark


Gilmour, Sir John (East Fife)
Miscampbell, Norman
Yates, William (The Wrekin)


Glover, Sir Douglas
Monro, Hector
Younger, Hn. George


Godber, Rt. Hn. J. B.
More, Jasper



Goodhart, Philip
Morrison, Charles (Devizes)
TELLERS FOR THE AYES:


Goodhew, Victor
Mott-Radclyffe, Sir Charles
Mr. Ian MacArthur and Mr. Pym.


Gower, Raymond
Murton, Oscar





NOES


Abse, Leo
Crosland, Rt. Hn. Anthony
Ford, Ben


Allaun, Frank (Salford, E.)
Cullen, Mrs. Alice
Fraser, Rt. Hn. Tom (Hamilton)


Alldritt, Walter
Dalyell, Tam
Freeson, Reginald


Atkinson, Norman
Davies, Ifor (Gower)
Garrett, W. E.


Bagier, Gordon A. T.
de Freitas, Sir Geoffrey
Ginsburg, David


Baxter, William
Dell, Edmund
Gourlay, Harry


Bence, Cyril
Diamond, Rt. Hn. John
Greenwood, Rt. Hn. Anthony


Bennett, J. (Glasgow, Bridgeton)
Dodds, Norman
Gregory, Arnold


Bishop, E. S.
Doig, Peter
Grey, Charles


Blackburn, F.
Duffy, Dr. A. E. P.
Griffiths, David (Rother Valley)


Blenkinsop, Arthur
Dunn, James A.
Hale, Leslie


Boardman, H.
Dunnett, Jack
Hamilton, James (Bothwell)


Bradley, Tom
Edelman, Maurice
Hamilton, William (West Fife)


Bray, Dr. Jeremy
Edwards, Robert (Bilston)
Hamling, William (Woolwich, W.)


Brown, Rt. Hn. George (Belper)
English, Michael
Hannan, William


Brown, Hugh D. (Glasgow, Provan)
Ennals, David
Harper, Joseph


Buchan, Norman (Renfrewshire, W.)
Ensor, David
Harrison, Walter (Wakefield)


Buchanan, Richard
Evans, Albert (Islington, S. W.)
Hazell, Bert


Callaghan, Rt. Hn. James
Fernyhough, E.
Heffer, Eric S.


Carmichael, Neil
Fletcher, Ted (Darlington)
Herbison, Rt. Hn. Margaret


Coleman, Donald
Fletcher, Raymond (Ilkeston)
Horner, John


Conlan, Bernard
Floud, Bernard
Houghton, Rt. Hn. Douglas


Crawshaw, Richard
Foot, Sir Dingle (Ipswich)
Howell, Denis (Small Heath)







Howie, W.
Mayhew, Christopher
Slater, Mrs. Harriet (Stoke, N.)


Hoy, James
Mikardo, lan
Slater, Joseph (Sedgefield)


Hughes, Cledwyn (Anglesey)
Millan, Bruce
Small, William


Hunter, Adam (Dunfermline)
Miller, Dr. M. S.
Snow, Julian


Irving, Sydney (Dartford)
Milne, Edward (Blyth)
Steele, Thomas (Dunbartonshire, W.)


Jackson, Colin
Molloy, William
Summerskill, Hn. Dr. Shirley


Jay, Rt. Hn. Douglas
Morris, Charles (Openshaw)
Swain, Thomas


Jeger, George (Goole)
Mulley, Rt. Hn. Frederick (Sheffield Pk)
Swingler, Stephen


Jenkins, Hugh (Putney)
Murray, Albert
Symonds, J. B.


Johnson, James (K'ston-on-Hull, W.)
Neal, Harold
Taverne, Dick


Jones, J. Idwal (Wrexham)
Newens, Stan
Thomas, George (Cardiff, W.)


Jones, T. W. (Merioneth)
Norwood, Christopher
Thomas, Iorwerth (Rhondda, W.)


Kelley, Richard
Oakes, Gordon
Thomson, George (Dundee, E.)


Kenyon, Clifford
Ogden, Eric
Tinn, James


Lawson, George
O'Malley, Brian
Tuck, Raphael


Leadbitter, Ted
Orme, Stanley
Urwin, T. W.


Lever, Harold (Cheetham)
Oswald, Thomas
Varley, Eric G.


Lever, L. M. (Ardwick)
Page, Derek (King's Lynn)
Walden, Brian (All Saints)


Lewis, Ron (Carlisle)
Paget, R. T.
Walker, Harold (Doncaster)


Lipton, Marcus
Palmer, Arthur
Wallace, George


Loughlin, Charles
Pentland, Norman
Watkins, Tudor


Mabon, Dr. J. Dickson
Rees, Merlyn
Wells, William (Walsall, N.)


McBride, Neil
Rhodes, Geoffrey
Whitlock, William


McCann, J.
Richard, Ivor
Williams, Alan (Swansea, W.)


MacColl, James
Robertson, John (Paisley)
Williams, Clifford (Abertillery)


MacDermot, Niall
Rodgers, William (Stockton)
Williams, Mrs. Shirley (Hitchin)


McGuire, Michael
Rose, Paul B.
Willis, George (Edinburgh, E.)


McInnes, James
Ross, Rt. Hn. William
Wilson, William (Coventry, S.)


Mackenzie, Gregor (Rutherglen)
Rowland, Christopher
Woof, Robert


Mahon, Peter (Preston, S.)
Shore, Peter (Stepney)
Yates, Victor (Ladywood)


Mahon, Simon (Bootle)
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)



Mallalieu, J. P. W. (Huddersfield, E.)
Silkin, John (Deptford)
TELLERS FOR THE NOES:


Manuel, Archie
Silverman, Julius (Aston)
Mr. George Rogers and Mr. Fitch.


Mapp, Charles
Skeffington, Arthur

Hon. Members: Resign.

Mr. Sydney Irving (Treasurer of Her Majesty's Household): I beg to move,
That further consideration of the Bill, as amended, be now adjourned.

Mr. Heath: I beg to move,
That further consideration of the Bill, as amended, be now adjourned.

Mr. Deputy-Speaker (Dr. Horace King): Order. I have from both sides of the House the same Motion. I must take that which came first.

Mr. Heath: rose—

Hon. Members: Why not the Leader of the Opposition?

Mr. Reginald Freeson: On a point of order—[Interruption.]

Mr. Speaker: Order. I think that I am being addressed on a point of order.

Hon. Members: Where is the Prime Minister?

Mr. Freeson: My point of order, Sir, is that I heard an hon. Member on the Opposition side using the word "ratting".

Hon. Members: Oh.

Mr. Speaker: Let there be order. I must hear the point.

Mr. Freeson: I wish to ask for your guidance, Sir, and perhaps I might have quiet while making my point of order. [Interruption.] With the permission of the gentlemanly party opposite, I would like your guidance on whether it is correct to use that kind of language. [HON. MEMBERS: "What language?"] I distinctly heard the remark thrown across the Chamber, not once, not twice, but three or four times, that hon. Members on this side, in particular the Prime Minister, were ratting.

Hon. Members: Where is he?

Mr. Speaker: What is the point of order?

Mr. Freeson: It is to ask whether that is appropriate and orderly language in this Chamber.

Mr. Speaker: I think that we have heard a lot worse. The language is slightly agricultural, but we had better tolerate it.

Mr. Heath: During the last few minutes the Government have been defeated by majorities which, in this Parliament, are substantial. As a result, a Clause of considerable importance has now been added to the Bill. It affects hundreds and thousands of small savers and investors who invest in unit and


investment trusts and for whom the rate of Capital Gains Tax will now be the same as for individuals. This has, therefore, achieved one of our objectives, persistently argued throughout the whole of the Committee stage and throughout the Report stage, that there should be special treatment for small savers.
This is a thesis which the Chief Secretary and, indeed, the Chancellor of the Exchequer and the whole of the Treasury Bench have constantly rejected. Now, as a result of the vote of both Opposition parties, the Government have been defeated, and immediately they have rushed for cover. It is well known in the House that the Government wished to go further tonight than the new Clauses, but, as a result of these defeats, they have put up a Whip to move that further consideration of the Bill, as amended, be now adjourned. They realise that they have lost control of the House. They have lost their majority and can no longer continue their business.
This is the second occasion today on which it has happened, both within the remembrance of the House. The Leader of the House of Commons was himself repudiated by a large part of his own party.
The Government and their supporters have been twice trounced this morning. Where is the Prime Minister? Only 10 days ago, in Glasgow, he was boasting of their achievement in carrying through the Committee stage of the Finance Bill, and he added:
If we can get the Finance Bill through with this majority, we can get anything through.
The Government have not got it through as they wanted it, so the lie is thrown in the Prime Minister's teeth. He cannot get it through. Therefore, he cannot get anything through, and the Government have admitted it.
The lesson will be drawn by the country. The Government, who are trying to force through a Finance Bill which the country does not want, have now been twice defeated. The Government have very quickly drawn the lesson themselves. The country will follow. The lesson for the Government is plain. They should resign, and resign quickly. The country can then pass its verdict upon them.

1.30 a.m.

The Chancellor of the Exchequer (Mr. James Callaghan): For a right hon. Gentleman who is claiming a great triumph, the right hon. Member for Bexley (Mr. Heath) seemed very grim in all that he has just said. There was not even a smile or a flicker of triumph across his face, so intense was his determination to enjoy the battle. He has won a great victory. Why does he not cheer up? [HON. MEMBERS: "Sit down."] We have plenty of time.
There is all the rest of tonight if hon. Members do not want to go home. We are quite ready to serve the House. If hon. Members do not want to go home, let us go on. There is no difficulty about that. The right hon. Gentleman seems to be enjoying himself now that he has sat down. I wish that he had enjoyed himself more when he stood up. I do not quite know what was the point of his intervention. Is he saying that he wants us to go on, or that he wants us to go home? [HON. MEMBERS: "Resign."] Before we decide that question, we had better decide what the Opposition want to do tonight—to go on or to go home? Which is it? I know what most of them really want to do. They want to go home to bed.

Mr. Heath: rose—

Mr. Callaghan: I am delighted to see the right hon. Member for Enfield, West (Mr. Iain Macleod) with us. There is at least one total abstainer in the House tonight. I am very glad indeed to have him here. [Interruption.] I do not know whether it is possible to make a connected speech when the Conservative Party are in this mood, but as far as I am concerned, I am in possession of the Dispatch Box and I am quite happy to remain in possession of it, certainly for the time it takes to quieten hon. Members opposite, so that we can decide what to do.
The Opposition have, after a succession of over 90, won a victory—[HON. MEMBERS: "Two".] I beg their pardon; they have won two victories. The score is now 93 to 2. That is not a bad tally. If the right hon. Gentleman the Member for Bexley and his right hon. and hon. Friends wish to continue with the debate on the Bill, then we will do so for so long as they like. If they


wish to carry on, then we on this side will be very happy to do so. [Interruption.] All hon. Members opposite seem to want to do is to score a false stratagem. They have got their victory, and now we can proceed with the Bill.
There is much more to discuss, and much to debate, and as the right hon. Gentleman does not appear to wish to go home, then I suggest that we continue with the debate—[Interruption.] I did not catch what that was, but I can tell hon. Members that we are running rather later than both sides expected to do. As the right hon. Gentleman has just said, we have not got all the business we expected. I should have thought, therefore, that there was every reason for continuing with the debate and getting

as much business completed as we possibly can tonight.

I hope that we can now proceed with the discussion on the Bill.

Mr. Heath: rose—

Mr. Speaker: I think that the right hon. Gentleman requires the leave of the House.

Hon. Members: No.

Mr. Speaker: The indications are that the right hon. Gentleman does not have the leave of the House.

Question put, That further consideration of the Bill, as amended, be now adjourned:—

The House divided: Ayes 180, Noes 167.

Division No. 240.]
AYES
[1.37 a.m.


Agnew, Commander Sir Peter
Elliot, Capt. Walter (Carshalton)
Legge-Bourke, Sir Harry


Alison, Michael (Barkston Ash)
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Lewis, Kenneth (Rutland)


Allan, Robert (Paddington, S.)
Emery, Peter
Lloyd, Rt. Hn. Selwyn (Wirral)


Allason, James (Hemel Hempstead)
Eyre, Reginald
Longden, Gilbert


Amery, Rt. Hon. Julian
Farr, John
Loveys, Walter H.


Anstruther-Gray, Rt. Hn. Sir W.
Fisher, Nigel
MacArthur, Ian


Astor, John
Fletcher-Cooke, Charles (Darwen)
Mackenzie, Alasdair (Ross &amp; Crom'ty)


Atkins, Humphrey
Fraser, Ian (Plymouth, Sutton)
Mackie, George Y. (C'ness &amp; S'land)


Awdry, Daniel
Gibson-Watt, David
Macleod, Rt. Hn. Iain


Baker, W. H. K.
Giles, Rear-Admiral Morgan
Marples, Rt. Hn. Ernest


Balniel, Lord
Gilmour, Ian (Norfolk, Central)
Marten, Neil


Barber, Rt. Hn. Anthony
Gilmour, Sir John (East Fife)
Maude, Angus


Barlow, Sir John
Glover, Sir Douglas
Maxwell-Hyslop, R. J.


Batsford, Brian
Godber, Rt. Hn. J. B.
Meyer, Sir Anthony


Bell, Ronald
Goodhart, Philip
Mills, Peter (Torrington)


Bennett, Sir Frederic (Torquay)
Goodhew, Victor
Miscampbell, Norman


Berry, Hn. Anthony
Gower, Raymond
Monro, Hector


Biggs-Davison, John
Grant, Anthony
Morrison, Charles (Devizes)


Black, Sir Cyril
Gresham Cooke, R.
Mott-Radclyffe, Sir Charles


Blaker, Peter
Griffiths, Peter (Smethwick)
Murton, Oscar


Box, Donald
Grimond, Rt. Hn. J.
Noble, Rt. Hn. Michael


Braine, Bernard
Gurden, Harold
Nugent, Rt. Hn. Sir Richard


Brewis, John
Hall, John (Wycombe)
Osborn, John (Hallam)


Brinton, Sir Tatton
Hall-Davis, A. G. F.
Page, John (Harrow, W.)


Bromley-Davenport, Lt.-Col. Sir Walter
Hamilton, M. (Salisbury)
Page, R. Graham (Crosby)


Brooke, Rt. Hn. Henry
Harris, Reader (Heston)
Pearson, Sir Frank (Clitheroe)


Brown, Sir Edward (Bath)
Harvey, Sir Arthur Vere (Macclesf'd)
Peel, John


Bruce-Gardyne, J.
Harvey, John (Walthamstow, E.)
Peyton, John


Bryan, Paul
Harvie Anderson, Miss
Powell, Rt. Hn. J. Enoch


Buchanan-Smith, Alick
Hastings, Stephen
Price, David (Eastleigh)


Buxton, Ronald
Hawkins, Paul
Prior, J. M. L.


Campbell, Gordon
Heath, Rt. Hn. Edward
Pym, Francis


Carlisle, Mark
Hendry, Forbes
Ramsden, Rt. Hn. James


Carr, Rt. Hn. Robert
Higgins, Terence L.
Redmayne, Rt. Hn. Sir Martin


Channon, H. P. G.
Hill, J. E. B. (S. Norfolk)



Chataway, Christopher
Hobson, Rt. Hn. Sir John
Rees-Davies, W. R.


Chichester-Clark, R.
Hopkins, Alan
Renton, Rt. Hn. Sir David


Clark, William (Nottingham, S.)
Hornby, Richard
Ridley, Hn. Nicholas


Cooke, Robert
Hutchison, Michael Clark
Ridsdale, Julian


Corfield, F. V.
Johnson Smith, G. (East Grinstead)
Roberts, Sir Peter (Heeley)


Costain, A. P.
Johnston, Russell (Inverness)
Roots, William


Courtney, Cdr. Anthony
Jopling, Michael
Sandys, Rt. Hn. D.


Crosthwaite-Eyre, Col. Sir Oliver
Joseph, Rt. Hn. Sir Keith
Sharples, Richard


Cunningham, Sir Knox
Kaberry, Sir Donald
Sinclair, Sir George


Curran, Charles
Kerr, Sir Hamilton (Cambridge)
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Dalkeith, Earl of
Kershaw, Anthony
Soames, Rt. Hn. Christopher


Dance, James
Kimball, Marcus
Speir, Sir Rupert


Davies, Dr. Wyndham (Perry Barr)
King, Evelyn (Dorset, S.)
Stainton, Keith


Dodds-Parker, Douglas
Kirk, Peter
Stanley, Hn. Richard


Doughty, Charles
Kitson, Timothy
Taylor, Sir Charles (Eastbourne)


Douglas-Home, Rt. Hn. Sir Alec
Lagden, Godfrey
Taylor, Edward M. (G'gow, Cathcart)


du Cann, Rt. Hn. Edward
Lambton, Viscount
Temple, John M.


Eden, Sir John
Langford-Holt, Sir John
Thomas, Sir Leslie (Canterbury)




Thompson, Sir Richard (Croydon, S.)
Wall, Patrick
Wolrige-Gordon, Patrick


Thorpe, Jeremy
Walters, Dennis
Wood, Rt. Hn. Richard


Tiley, Arthur (Bradford, W.)
Ward, Dame Irene
Woodhouse, Hn. Christopher


Tilney, John (Wavertree)
Webster, David
Woodnutt, Mark


Turton, Rt. Hn. R. H.
Wells, John (Maidstone)
Yates, William (The Wrekin)


van Straubenzee, W. R.
Whitelaw, William
Younger, Hn. George


Walder, David (High Peak)
Williams, Sir Rolf Dudley (Exeter)



Walker, Peter (Worcester)
Wilson, Geoffrey (Truro)
TELLERS FOR THE AYES:




Mr. McLaren and Mr. More.




NOES


Abse, Leo
Hale, Leslie
Newens, Stan


Allaun, Frank (Salford, E.)
Hamilton, James (Bothwell)
Norwood, Christopher


Alldritt, Walter
Hamilton, William (West Fife)
Oakes, Gordon


Atkinson, Norman
Hamling, William (Woolwich, W.)
Ogden, Eric


Bagier, Gordon A. T.
Hannan, William
O'Malley, Brian


Baxter, William
Harper, Joseph
Orme, Stanley


Bence, Cyril
Harrison, Walter (Wakefield)
Oswald, Thomas


Bennett, J. (Glasgow, Bridgeton)
Hazell, Bert
Page, Derek (King's Lynn)


Bishop, E. S.
Heffer, Eric S.
Paget, R. T.


Blackburn, F.
Herbison, Rt. Hn. Margaret
Palmer, Arthur


Blenkinsop, Arthur
Horner, John
Pentland, Norman


Boardman, H.
Houghton, Rt. Hn. Douglas
Rees, Merlyn


Bradley, Tom
Howell, Denis (Small Heath)
Rhodes, Geoffrey


Bray, Dr. Jeremy
Howie, W.
Richards, Ivor


Brown, Rt. Hn. George (Belper)
Hoy, James
Robertson, John (Paisley)


Brown, Hugh D. (Glasgow, Provan)
Hughes, Cledwyn (Anglesey)
Rodgers, William (Stockton)


Buchan, Norman (Renfrewshire, W.)
Hunter, Adam (Dunfermline)
Rose, Paul B.


Buchanan, Richard
Irving, Sydney (Dartford)
Ross, Rt. Hn. William


Callaghan, Rt. Hn. James
Jackson, Colin
Rowland, Christopher


Carmichael, Neil
Jay, Rt. Hn. Douglas
Shore, Peter (Stepney)


Coleman, Donald
Jeger, George (Goole)
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)


Conlan, Bernard
Jenkins, Hugh (Putney)
Silkin, John (Duptford)


Crawshaw, Richard
Johnson, James (K'ston-on-Hull, W.)
Silverman, Julius (Aston)


Crosland, Rt. Hn. Anthony
Jones, J. Idwal (Wrexham)
Skeffington, Arthur


Cullen, Mrs. Alice
Jones, T. W. (Merioneth)
Slater, Mrs. Harriet (Stoke, N.)


Dalyell, Tam
Kelley, Richard
Slater, Joseph (Sedgefield)


Davies, Ifor (Gower)
Kenyon, Clifford
Small, William


de Freitas, Sir Geoffrey
Leadbitter, Ted
Snow, Julian


Dell, Edmund
Lever, Harold (Cheetham)
Steele, Thomas (Dunbartonshire, W.)


Diamond, Rt. Hn. John
Lever, L. M. (Ardwick)
Summerskill, Hn. Dr. Shirley


Dodds, Norman
Lewis, Ron (Carlisle)
Swain, Thomas


Doig, Peter
Lipton, Marcus
Swingler, Stephen


Duffy, Dr. A. E. P.
Loughlin, Charles
Symonds, J. B.


Dunn, James A.
Mabon, Dr. J. Dickson
Taverne, Dick


Dunnett, Jack
McBride, Neil
Thomas, George (Cardiff, W.)


Edelman, Maurice
McCann, J.
Thomas, Iorwerth (Rhondda, W.)


Edwards, Robert (Bilston)
MacColl, James
Thomson, George (Dundee, E.)


English, Michael
MacDermot, Niall
Tinn, James


Ennals, David
McGuire, Michael
Tuck, Raphael


Ensor, David
McInnes, James
Urwin, T. W.


Evans, Albert (Islington, S. W.)
Mackenzie, Gregor (Rutherglen)
Varley, Eric G.


Fernyhough, E.
Mahon, Peter (Preston, S.)
Walden, Brian (All Saints)


Fitch, Alan (Wigan)
Mahon, Simon (Bootle)
Walker, Harold (Doncaster)


Fletcher, Ted (Darlington)

Wallace, George


Fletcher, Raymond (Ilkeston)
Mallalieu, J. P. W. (Huddersfield, E.)
Watkins, Tudor


Floud, Bernard
Manuel, Archie
Wells, William (Walsall, N.)


Foot, Sir Dingle (Ipswich)
Mapp, Charles
Whitlock, William


Ford, Ben
Mayhew, Christopher
Williams, Alan (Swansea, W.)


Fraser, Rt. Hn. Tom (Hamilton)
Mikardo, Ian
Williams, Clifford (Abertillery)


Freeson, Reginald
Millan, Bruce
Williams, Mrs. Shirley (Hitchin)


Garrett, W. E.
Miller, Dr. M. S.



Ginsburg, David
Milne, Edward (Blyth)
Willis, George (Edinburgh, E.)


Gourlay, Harry
Molloy, William
Wilson, William (Coventry, S.)


Greenwood, Rt. Hn. Anthony
Morris, Charles (Openshaw)
Woof, Robert


Gregory, Arnold
Mulley, Rt. Hn. Frederick (Sheffield Pk)
Yates, Victor (Ladywood)


Grey, Charles
Murray, Albert



Griffiths, David (Rother Valley)
Neal, Harold
TELLERS FOR THE NOES:




Mr. Lawson and Mr. George Rogers.

Mr. Speaker: Consideration to be resumed what day?

Mr. George Rogers (Lord Commissioner of the Treasury): Tomorrow, Sir.

Hon. Members: Never.

Mr. Speaker: This day.

Bill, as amended, to be further considered this day.

Mr. Callaghan: We will beat you next time, too.

ADJOURNMENT

Resolved, That this House do now adjourn.—[Mr. George Rogers.]

Adjourned accordingly at eleven minutes to Two o'clock.